Fine year for mergers and acquisitions with more in the pipeline

Last year can be described as a bumper 12 months for Scottish mergers and acquisitions (M&A) activity.

After a lull during 2020, the market was due for a rebound in terms of activity levels and 2021 certainly provided one.

The appetite for investment from private equity firms was noticeable throughout the year as investor confidence returned, and we saw these levels soar past those of a prepandemic world.

M&A activity levels remained healthy as companies looked to generate value and opportunities within postpandemic growth sectors.

Technology was a key growth sector in Scotland during 2021 and has been a real driving force in the overall market rebound.

The growth experienced in this sector can be attributed to a handful of reasons, one of which is the strengthening of the technology ecosystem throughout Scotland.

We continue to see a conveyor belt of highquality tech businesses come out of Scotland, with established incubators such as Edinburgh’s CodeBase and One (Opportunity North East) CodeBase in Aberdeen providing great support and a clear pathway for Scotland’s entrepreneurs.

Tech scale-ups now have even more support available, thanks to the recent launch of two AABsponsored accelerator programmes, Halo in Kilmarnock and STAC (Smart Things Accelerator Centre) in Glasgow.

Much like technology, the business services sector was a big winner in 2021.

It enjoyed an exceptionally busy year for M&A activity, achieved through a combination of business owners and investors feeling it time to realise their investments, and also strategic acquirers using the opportunity and available resources to consolidate and expand.

This was demonstrated when our AAB corporate finance team helped advise customer management business CXP Group on its disposal to Huntswood CTC.

As the wider economy continued to recover from the pandemic and market lows of 2020, the energy sector very much followed suit and underwent a much-needed rebound during 2021.

Oil prices saw a steady rise throughout the year and at the time of writing Brent crude sits at $91 per barrel – a stark contrast to the $16 per barrel lows of 2020.

An increase in demand and the supply cap placed by Opec are major contributors to this rise.

The increase in demand and supply naturally flowed into the sector’s M&A activity levels.

There was strong deal activity throughout last year and this is expected to continue through 2022.

Meanwhile, we are seeing an increased number of companies start to reposition themselves to the renewable and green energy subsectors as they strive to meet their net-zero targets.

Elsewhere, the construction and property sector underwent a tumultuous 2021.

Many large-scale projects were given the go ahead, only to be hampered by significant supply chain issues.

These issues were felt by almost every business in the sector.

The second half of 2021 started to show signs of improvement, but delays to construction work as a result of Omicron meant there was a slow end to the year.

There is now general optimism the supply chain difficulties have passed their peak.

Government investment in major infrastructure projects and a rise in commercial property construction are offsetting a slowdown for housebuilding.

On the back of this increased optimism, we can expect continued M&A activity across the sector in 2022 as supply chain issues continue to ease.

Alongside the overall market activity across Scotland last year, our own corporate finance team at AAB had a stellar 2021.

It successfully completed more than 50 transactions, with a combined deal value in excess of £750 million.

To name a few standout transactions, our team advised on Waldorf Energy’s £330m acquisition of Cairn Energy’s interest in the North Sea’s Catcher and Kraken fields and Donaldson Group completing the transformational acquisition of Stewart Milne Timber Systems – the third transaction AAB has advised the group on over the past two years.

As we head into 2022 and think about predictions for the year to come, we can expect deal activity to remain high as the market continues to rebound after the economic downturn of 2020 and confidence continues to grow among business owners and investors.

Our corporate finance team at AAB has started 2022 with a flurry of deals.

It advised subsea rental equipment company STR in its investment from Baird Capital.

The team also acted on behalf of Puma Private Equity in its £5m investment in technology platform developer Deazy.

Our team is excited about what 2022 is likely to bring, with a strong pipeline of deals to drive forward during the remainder of the first quarter and beyond.

Gordon Steele is a corporate finance partner and head of deals in the Aberdeen office of Anderson Anderson & Brown.

ON THE UP: Gordon Steele, below, is optimistic about what 2022 has in store.