Plimsoll predicts a series of takeovers and sell-offs as smaller companies sell to bigger companies. PHOTO: SHUTTERSTOCK

Industry analyst Plimsoll Publishing is warning that the impact of the current economic climate will see smaller niche players selling off their businesses to larger rivals.

In a new report, Plimsoll says as the effect of the economic slow-down reaches the UK, the forklift industry will experience a series of takeovers and sell-offs as smaller companies sell to bigger companies.

David Pattison, senior analyst at Plimsoll, says there is a combination of needs forcing smaller companies to sell. "Smaller companies need to finance the expansion of the company to continue development, they need to provide the business with a more stable footing and provide a future well beyond the current path."

He notes, however, that many of these smaller companies are carving out niche markets and returning premium profit margins and sales increases - some in excess of 27% per year.

"Despite the excellent returns, there now seems to be an eagerness to sell from many owners," he observes.

"Their businesses are now reaching a critical point in their development and combined with the tightening of credit and the reluctance of money markets to finance the next phase of development, selling their businesses makes sense."

Pattison says the selling brings the chance of stability and security and adds extra resources to accelerate the smaller company's development.

The report found larger companies are eager to acquire the smaller companies as a way to develop their businesses further. Pattison says the accelerated acquisition activity has a lot to do with necessity.

"Many of the larger players in the market, despite the downturn, are desperate to develop their business," he says. "With the current climate, costs are being cut and business development is being slashed.

"So they need options to help them protect their futures and tap into existing revenue and profit streams."

Pattison adds that as companies reduce their costs, they look for ways to keep business momentum going. "By financing small acquisitions, they get a quick route to increasing sales at a relatively low cost and a foothold in emerging sectors of the market.

"Most of the acquisitions will be small," he says. "Larger companies will be able to finance these and not put themselves at risk.

"A well-timed acquisition is going to be the key for the larger companies to ensure they are keeping pace with the up-and-coming sectors of the market."

However, Pattison says the forecast acquisitions are not a case of "them and us." "We are talking about a few very important acquisitions. The coming together of these large and small companies will benefit both parties as both sides have assets the other needs."