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Why a formal M&A process matters in the lower mid-market
Demand for high-quality, affordable M&A advice has grown steadily over the past few years, especially among founders preparing to exit. An ageing base of owner-managers, the search for succession solutions and a need for liquidity are all bringing more good businesses to market.
Yet larger advisory firms are increasingly reluctant to act in the lower mid-market, worrying that deal values are too small to meet their fee targets. Where they do engage, owners are often unwilling, or unable, to justify the fees involved. This leaves a clear gap and a clear need for advisers who can run a rigorous process at a sensible cost.
Despite this need, many owner-managed businesses remain wary of running a formal process at all. The hesitation is usually rooted in cost, coupled with uncertainty about what a process actually delivers. Whilst understandable, in our experience that caution is misplaced; a well-run process consistently recovers its cost many times over and is one of the most reliable ways to protect and enhance value on exit.
Much of that value is created before a business ever reaches the market. Owners are understandably keen to move quickly, but good preparation is what underpins a strong valuation. Today's buyers are selective and cautious, and rightly so given market conditions.
Without a clear equity story, polished financials and well-prepared diligence materials, a buyer will likely reduce their potential offer or walk away entirely. Time spent preparing alongside dedicated advisers is rarely time wasted.
A formal process also widens the field. It brings a business to the attention of a far broader buyer universe, including institutional investors an owner may never have encountered. Importantly, it allows several parties to be run in parallel, soliciting multiple bids and creating the competitive tension that drives value upward. A single unsolicited approach, by contrast, almost never represents the best market price.
It also keeps deals moving. Misalignment between buyer and seller continues to slow and often kill transactions. A structured process narrows that gap early by testing market appetite and validating pricing against real offers rather than assumptions. Defined timelines and organised diligence maintain momentum and materially reduce execution risk.
A further dynamic to note is that accountancy and advisory firms increasingly use M&A to cross-sell their wider services, and a business's existing advisers can occasionally be reluctant to recommend a specialist process for fear of being replaced. Whilst it is important for firms to cross-sell, a dedicated M&A team should complement, not compete with, a client's trusted advisers. The skills are supplementary, and the best outcomes come from working alongside the wider team rather than around it.
In terms of the current market, significant uncertainty still remains as result of UK Government policy, wider geopolitics and the unknown impact of AI. Buyers have become more selective, which has meant fewer deals, though arguably ones of better quality.
At the lower mid-market level, the disruption has been slightly less pronounced, and over recent months we have seen confidence begin to return. We expect buyers to continue to be selective, but that growing confidence should develop into an up-tick in activity across the remainder of the year.
Private Equity still remains a key player in the market. Significant levels of dry powder, combined with increased pressure to deploy it, will continue to drive future activity. Buy-and-build strategies remain a major focus, especially in professional services, both accountancy and more recently, legal practices. The lower mid-market is particularly attractive for these types of strategies.
In summary, there is capital available and there are buyers that are active, they’re simply more selective about where they commit that capital. Therefore, the quality of the sales process is what will separate a successful exit from a disappointing one.
A formal process is not an unnecessary cost. It is the single most effective lever an owner has to maximise value.
For further information on how we can support you and your business, please reach out to either:
Toby Rolls - Head of M&A Advisory
toby.rolls@leonardcurtis.co.uk
07919 100051
Ed Fenwick - M&A Manager
ed.fenwick@leonardcurtis.co.uk
07702 976984
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