Firstly, let me apologise for the footballing analogy. For some the pain of Kane’s missed penalty is still too near, and yet I am struggling to find another comparative that sums up this year so succinctly.

Casting my mind back to January 2022, we had just emerged from another Covid Christmas period and the mood was one of optimism. Enquiries were back to the pre-pandemic levels, a number of large transactions were being negotiated with serious and eager buyers, and everyone was looking to the future.

This momentum was maintained right through spring, with the completion of more high value deals, a burgeoning pipeline, clients eager to sell and a seemingly unending parade of buyers that were calling at all hours (and weekends) to ask if they could get a look at our portfolio before the wider market.

Was this due to pent up demand? The people I have asked don’t think so. Whilst some focus of business owners during the pandemic was shifted to survival and managing furloughed staff, many found a lot of spare time on their hands where they could dedicate efforts to planning their sale. This tended to even out the demand curve and onboarding clients was steady.

Was it due to the investment landscape changing? Perhaps. There certainly was plenty of capital sloshing around after Rishi’s money tree had been discovered at the bottom of his Northallerton garden.

Whatever the cause, the M&A market was back to it’s best, plenty of willing sellers, a horde of well financed buyers, an economy that was heaving a huge sigh of relief and the weather was bloody nice too.

This M&A utopia raced along until August. Half time.

Out for the second half and suddenly a few wisps of clouds appeared on the sunny horizon. Inflationary signals that had been there for a number of months that had been ignored whilst the sun was shining were gathering momentum. The rush for gas due to Putin’s war, the emerging fragile state of the UK energy market was now feeding a cost-of-living crisis.

The Bank of England failed to act by unwinding QE and cutting down the fabled money tree which in turn fed inflation. Now there was no putting the genie back in the bottle. A series of interest rate rises now squeezed incomes further and whispers of a recession became a self-fulfilling prophesy.

The result? Well, the sellers were still there. The buyers were still there, albeit that the rising cost of borrowing was now being factored into investment decisions. Multiples in some sectors that were probably overheating anyway began to fall. The economy though…

The mini budget slammed the brakes on. Which was ironic as it was intended to hit the accelerator. A new word was born. Trussonomics. A well intentioned, but un-costed growth plan was put forward. It went too far, too fast and blind-sided pretty much everyone (including the BOE). The market had kittens.

A shift occurred (what seemed like overnight) and the market adopted a wait and see mentality. A flurry of red cards followed and when Jeremy Hunt stripped off and came on as super-sub, he promptly threw the tax earning baby out with the bath water. His penalty hit row Z.

Business was now in defensive mode. Investment put under review. The result is likely to be a further reduction in multiples for deals in those shaky sectors. At least for the quarter.

Business will have to get used to this new anti-business sentiment running through the Treasury. Jeremy Hunt may well be in office for another 18 months, after that may come a labour government. This is the new normal.

As December began, despite the cold weather, a thaw is being sensed. Cash hoarded is eroded by inflation and decent returns on investment are still attainable. The UK has many strong SME and mid-market businesses that will compliment and strengthen portfolios. Any recession may be shallow and inflation will indeed fall. Interest rates will follow and the cost of borrowing will normalise by the end of Q1.

So, to sum up with another footballing analogy: 2022. They think it’s all over. It is now.

James Wilkins

James is a Chartered Accountant and Director at Symmetry Corporate Finance.