A transaction enjoys a much better prospect of success where parties have prepared

The outlook for the Scottish mergers and acquisitions market is cautiously optimistic, despite the recent sustained political and economic uncertainty.

Investors and business owners still consider M&A as a key part of their strategic plans for growth, expansion and value realisation.

A well-planned and executed acquisition can provide access to new market sectors, diversification of service lines and capabilities which can be marketed to existing customers.

Other benefits could include the gaining of intellectual property and increased geographical reach.

These opportunities outlined above could be developed organically, but that must be weighed against the time, risk and resource required to build from scratch – especially given today’s pace of market change.

Meanwhile, for the majority of business owners – particularly in the SME space – building a firm for disposal, whether to a trade player, private-equity firm or management team – remains the most popular and lucrative exit strategy.

For now at least, the tax regime for sellers remains favourable.

Using tax-advantaged share-incentive schemes can enable businesses which may come up for sale to attract and retain talented management teams committed to growing the equity value of the venture knowing they will ultimately share in the reward.

There is no doubt that when a M&A transaction comes together it can be a “win-win” for acquirer, vendor and other key stakeholders of the business.

But remember too that not all deals – even the biggest ones – turn out to be successful.

Investopedia describes AOL Time Warner as perhaps the most prominent merger failure ever.

In 2001, America Online acquired Time Warner in a megamerger for $165 billion (£125bn) – the largest business combination up until that time.

Shortly after, however, the dotcom bubble burst, which caused a significant reduction in the value of the AOL division. In 2002, the company reported a loss of $99bn (£75bn) – the largest annual net loss ever reported, attributable to goodwill write-off of AOL.

But, while history shows even the best-laid plans don’t always work out, there is no doubt that – on both the buy and sell side of a deal – a transaction enjoys a much better prospect of success where parties have prepared.

There is cautious optimism in the mergers and acquisitions market in Scotland at the moment