Just before the EU referendum there was speculation around at least four industry deals that were on ice until the result of the poll was known. Then we found out and the UK voted to leave the EU. Then four deals were completed just days after the result. So no worries there then.

But I don’t think that we have seen the end of the spending spree just yet. Here’s why.

Drop in sterling is a good thing

It’s not all doom and gloom just because the value in Sterling compared to the Dollar and the Euro has dropped. Whilst pricing pressure has increased somewhat in our sector, it has also meant that British companies who make their profits in the greenback are going to enjoy some healthy bumps in profit.

It also means that foreign investment has become a fair slice cheaper. The cost to convert Dollars and Euros to Pounds has become cheaper, and this makes British companies a lot more attractive to foreign prospects. The most likely countries to take an interest in our companies is the US and European companies with a German or Scandinavian flavour.

Whilst Sterling continues to hover at the $1.30 mark, investment in British window and door companies will remain an attractive prospect. We live in a globalised world now, and it’s still important to think outwardly towards the whole of the global market.

Overcapacity

Whilst the subdued currency rate will mean foreign interest will be higher than normal, overcapacity in the market here will also add to the possibility of further mergers in the coming months.

There is no doubt that in many areas of our industry, there is still overcapacity in some areas. Specifically in the pure PVCu fabrication market. There has been a steady decline in the number of PVCu fabricator in the past few years, and in a recent post I posed the question of the market being in crisis. However I think that if there is going to be further M&A activity it is going to be in this area primarily.

Business is good in our industry right now, but it is mixed, and is a much more diverse industry. There probably needs to be a reduction in the number of PVCu fabricators. For this to happen, some companies will either need to be bought and merged into larger groups. Or, switch material focus and aim at other areas of the market. Or, in a less attractive option, close doors altogether and disperse within the industry. The two first options are of course the more desirable.

A buyers market

One thing is for sure, if you’re a business with some cash to spend, you hold all the cards. Market conditions in relation to material demand of PVCu means fabricators are good value for money. Foreign investors spending in Euros or Dollars will get more bang for their buck. With interest rates lowered again, money has never been so cheap to borrow to facilitate a buyout or merger.

There has probably never been such an opportune time to purchase a window and doors business as is present right now. I would find it hard to believe that we could make it through the rest of the year without another high profile industry deal being done.

The rumor mill is a constant one, and there are one or two whispers always doing the rounds. Whether these come to fruition, only time will tell. But it could still be a busy M&A season right the way up until the end of the year.

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