Two weeks ago, Countryside Properties PLC announced the acquisition of Westleigh Group Limited for a total cash consideration of up to £135.4m.

At the time, Ian Sutcliffe, chief executive at Countryside, stated that it saw huge opportunity in combining Westleigh’s regional expertise with its mixed-tenure business model.

In March, Legal & General Capital announced that it had acquired the remaining 52.1% of CALA Homes which it previously didn’t own.

Are these recent acquisitions the sign of a growing trend for this year?

Potential M&A activity between housebuilders in 2018

Michael Dean, principal at Avamore Capital, believed that it was always a possibility, especially among small- and medium-sized housebuilders with good land banks.

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“Additionally, with London performing poorly, the bigger players may wish to gain market share in the regions and they can achieve this by buying a regional player.”

Narinder Khattoare, CEO at Kuflink, added: “The current trends suggest an increase in the number of M&A in the housebuilding sector in 2018 compared with previous years.

“This is in some part due to easing tensions surrounding certain events in the UK, such as Brexit, and the slow but steady growth of the economy.

“We expect this to lead to increased housebuilding M&A activity as 2018 continues.”

Positive effects on the market

Michael claimed that an increase in M&A activity among housebuilders would have few positives.

“We may see senior staff spin out of newly acquired firms to set up on their own, which may create a new breed of SME housebuilders, which could be a positive, but that’s pure speculation,” he claimed.

“Generally, as I have [previously mentioned], a reduction in the plurality of housebuilders is [by and large] a bad thing for supply and the housing market as a whole.”

Narinder added: “Increased M&A activity in the housebuilding sector could mean [that] larger build-to-rent and affordable housing projects may be approved and be more cost effective due to economies of scale and a more competitive marketplace in the upper end of the market.

“One of the issues is that increased M&A activities will mean that while there will be more larger housebuilding firms, there will be fewer firms overall, which may lead to less competition for smaller development projects across the country, resulting in higher prices for buyers.”