Growing companies with healthy balance sheets are finding themselves in a position where they can acquire rivals, or buy out shareholders with poorer balance sheets, says Datamonitor firm Ovum.

Growing companies with healthy balance sheets are finding themselves in a position where they can acquire rivals, or buy out shareholders with poorer balance sheets, says Datamonitor firm Ovum.

Ovum suggests that over the next few months there is likely to be strong M&A activity at the lower end of the UK market, especially from companies in the £1 million to £5 million turnover bracket looking to acquire robust product portfolios or service operations.

Ovum suggests that some smaller businesses are overly reliant on fewer customers and as a result could face extreme cash-flow pressures if larger customers cancel, reduce or delay orders.

One such growth company that snapped up a rival for its customer base is Video Tec Zoom, a cash-generative manufacturer and supplier of closed circuit television. The Wigan-based company acquired Security Management Plus, a CCTV installation business specialising in schools and colleges last month.

The acquisition of the £1 million-turnover Staffordshire venture for an undisclosed six-figure sum broadens Video Tec’s geographic scope, and gives the business access to the growing market of school security.

The bolt-on acquisition is forecast to increase Video Tec Zoom’s turnover to more than £5.5 million next year.