Bunzl has £1bn acquisition war chest as Biden tax plans prompt US groups to sell
UK catering and cleaning products company has database of 1,000 small businesses it wants to buy
British catering and cleaning products manufacturer Bunzl is planning a spending spree backed by £1bn of available capital for businesses hit by the pandemic or wanting to sell up in the US because of President Joe Biden’s proposed tax increases.
Frank van Zanten, chief executive of the FTSE 100 group, said merger and acquisition targets had opened up after some businesses had suffered a “shocking experience” in the pandemic, while others in the US feared tax hikes.
The Biden administration has proposed a rise in capital gains tax, as well as an increase in corporate tax from 21 per cent to 28 per cent, to fund spending on childcare, education and infrastructure.
Zanten said the company had room to spend £1bn and was tracking a database of 1,000 small businesses it wanted to acquire.
He said “triggers” to sell included owners retiring or a family death, while the possibility of higher US taxes was convincing many small, family-owned distribution companies they needed to find buyers for their businesses.
“There was a lot of activity happening when Biden announced some possible tax changes. There are people who want to sell their business by the end of the year.”
He added: “When businesses return to 2019 levels, we see a lot of M&A activity coming toward us. It has been a shocking experience for a lot of people who thought their business was financially secure.”
So far this year, the business supplies distributor has spent £134m on eight acquisitions.
Zanten outlined the latest developments on the acquisition drive as the company announced it expected underlying revenue this year to be moderately higher than in 2019, before the pandemic.
Sales were boosted by a recovery in demand for its products used in offices, hotels and restaurants, offsetting a fall in sales of pandemic-related items such as masks, sanitisers and gloves in the first half of 2021.
Despite continuing demand for hygiene-related products, large government-related bodies are now buying less.
The company had been a huge beneficiary of the surge in sales and rising prices for personal protective equipment last year.
Statutory pre-tax profit increased to £276m in the six months to June 30, a 12.3 per cent rise compared with the first half of last year, while revenue inched up to £4.8bn.
Its reported profits were also hit between 6 per cent and 8 per cent by the appreciation of sterling against the dollar.
Shares in the group fell 4 per cent to £25.83 by early afternoon on Tuesday.