Following Asda’s takeover last year, and CD&R’s successful £7 billion offer to acquire Morrisons after a series of speculation and bidding for the company, attention has turned to Sainsbury’s. The UK has seen an unprecedented surge in takeovers of UK companies in the private sector following Covid-19 and Brexit with Refinitiv finding that in 2021, buyouts of UK companies of British companies increased by 98% in comparison to 2019. As such, this speculation surrounding Sainsbury’s is unsurprising and seems set to see this trend continue in UK markets.

The volume of deals has been noticed by professional service and accounting firms, a sector which saw a far quieter year initially given Covid-19 and Brexit. Mid-sized firms have taken this opportunity to disrupt and diversify the sector this year, taking on many of these large clients, offering more tailored solutions. This has proven a prime opportunity for these firms to further monopolise and aid both buyers and sellers in the private sector, ensuring neither party falls flat at a time of rapid deals, and surges in cashflow and financial backing driving deals quicker than ever before.

However, while UK markets have begun to flourish due to this rapid increase in deals, companies run the risk of failing to consider the health of their equity stories and therefore seeing a sudden burnout. Professional service firms will be vital in ensuring companies accept bids appropriately, maintaining sustainable models that encourage a healthy market. With appropriate foundation, companies are now set to shift a previously rather staid UK economy in favour of a healthy private deals market long past the immediate effects seen due to company undervaluations following a global pandemic and departure from the European Union.

Chris Biggs, Partner at Theta Global Advisors – an accounting and consultancy disruptor – has commented:

“W are seeing a perfect storm of returning optimism, loosening restrictions and undervalued firms. We have been instructed on a number of deals in the past few weeks, and with speculation surrounding a takeover of Sainsbury’s, this looks set to carry on for the foreseeable future, something that will be a boost to firms and especially those below the Big Four.

“While the UK market is seeing a strong wave, there are also signs of burnout and this trend coming to a somewhat jarring end. However, for those companies investing now into developing and maintaining strong equity stories, the future seems far more stable. A strong equity story will allow these companies to continue to ride this wave and make plans for healthy developments as a company, developing financially in a sustainable manner going forwards.

“The UK has set up a plan for recovery that is extremely investment-friendly post-Covid. Despite the initial impact of Brexit with deals and investments moving abroad, we are seeing the financial services sector adapt, with mid-sized firms offering agile, diverse services to their clients with less risks for conflicts of interest we have seen previously.

“As business look to avoid actual or perceived conflicts of interest, I can see a big shift towards smaller firms. It is easy to get lost in a sea of big clients if your firm is not a key account, but when working with smaller accountancy practices your needs are prioritised no matter how big you are. This has come into increased focus throughout the pandemic and will continue long beyond it.”