07 | 09 | 2018
The Destruction of Industry Barriers
Business owners are becoming smarter and they’re starting to think about what will truly affect their business in the future. With mergers and acquisitions becoming a "mega-trend" throughout the UK's economy, and more corporations starting to collaborate with one another they are forming what is known as "cross-sector businesses" specialising in more than one sector. This mega-trend has already taken effect within Healthcare, Construction, Utility and Educational sectors, with them now working together to improve access to knowledge throughout different communities. Businesses are now thinking about what is needed when it comes to surviving in the 'new world' of business, by looking at how they can make their rivals into collaborators with new business models. In the report conducted by EY, they believe there should be a framework in place to bring order to the chaos that might be caused by company mergers. It has been announced that the global economy has hit an all-time record of $2.5 trillion (£1.94 trillion) in company mergers in the first quarter of 2018, with corporations now noticing the overall benefits in joining other corporations and expanding into new sectors, there will be a bounty of shared knowledge amongst a variety of industries. Inward Mergers and Acquisitions (M&A) within the UK has been valued at £21.7 billion within the first Quarter (Jan to Mar) 2018, that's £18.2 billion higher than Quarter four (Oct to Dec) 2017; this reflects the significant impact a small number of high-value deals throughout the UK effects our economy. Throughout July a significant number of deals took place within the energy sector, which has again demonstrated high levels of buyer appetite and demands. For example, Next Energy Solar Fund Ltd has acquired 10 South West UK-based solar plants for £42m, as the solar energy sector continues to see significant growth and investment. On the other hand, retail mergers and acquisitions rise by 15% as businesses try to combat falling sales with financial firms favouring M&A over flotations, due to weak demand from investors. Selling up to a competitor is seen as a more secure way for existing investors to exit a smaller retailer than an IPO (Initial Public Offering) which could be cancelled at any point which will be due to short-term volatility or poor sentiment towards the sector. We have already seen many retailers go into administration throughout 2018; Toys ‘R’ Us, Joe Bloggs (Fashion Retailer), Bench (still trading) and Henri Lloyd (Harvey Nichols Retailer). With more retailers seeing their sales plummet, is it really a bad idea to merge?