32 corporate finance
Private equity likely to dominate mid-market deals
The future may be uncertain but so far the corporate finance market across the south east has mirrored the UK economy. Improvements in the level of mid-market deal activity are there, but are of the slow and gradual kind – certainly not a boom. So what has driven this change? Baker Tilly’s south east regional head of corporate finance, Kirsty Sandwell, looks at the evidence
Mid-market deal volumes are dominated by the activity of large privately owned businesses. Decisions taken by these companies can be driven by both personal agenda as well as a commercial one. It is also the area of the market which is well served by the private equity and VCT community so has access to capital outside of the debt markets. In a flat market it continues to be the case that only good quality businesses will attract interest. However, for those corporates in an interesting niche that have demonstrated growth and already have good exposure or the potential to crack overseas markets, there is a great deal of appetite.
Prices and valuations being achieved reflect this with private equity and overseas buyers regularly competing. We have recently seen first- hand evidence of this with knowledge process outsourcer, The Smart Cube, a lower mid-market business with global sales needs and delivery
centres in India and Romania attracting a great deal of interest from the venture capital community; and specialist lighting manufacturer Designplan which was bought by one of Europe’s leading lighting manufacturers and distributors, the Nasdaq OMX listed Fagerhult Group, for £10 million in cash as it seeks to expand its UK operations.
The debt markets remain challenging for small companies especially if their operations are not well suited to attracting an asset-based lending or invoice discounting facility. However for larger deals of £10m and above there has been more success. An example of this is Brighton and Hove Council which has recently succeeded in securing a £33m PFI style debt facility from Santander in order to undertake a major redevelopment of social housing stock across the city.
So whilst the signs were there for continued steady improvement the ongoing enormous
The importance of directors’ and
officers’ insurance to SMEs SMEs are often characterised as fast, flexible and energetic. However, they are also likely to have limited risk management infrastructures in place, which could have significant consequences, writes Julian Hilton, regional managing director for Jelf Insurance Brokers
In today’s world, it is easy for claimants to pursue claims – and the onus is on the defendant to foot the bill. With the raft of health and safety regulations and employee-related legislation in the workplace, one error could put the directors’, and their dependents, livelihoods at risk.
Directors’ and officers’ (D&O) insurance is designed to protect against the typical scenarios an individual director is likely to encounter, and cover the costs of a defence or employment tribunal, as well as the rewards for covered claims.
Directors are in the firing line
If things go wrong in a company, it is the directors who usually take the hit. Their personal assets, including their home, savings and pension can be at risk, whether they have acted deliberately,
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obliged to co-operate with investigators, which can involve accountants, lawyers and architects – all at great expense, which some businesses won’t be able to absorb.
Ensuring you have the right cover in place
Unless a specific exclusion exists, most D&O policies will cover legal costs associated with an investigation, from initial stages through to court proceedings – far more than general legal expenses cover. Even if the policy is no longer in place, D&O insurance can cover directors as long as the policy was in place at the time of the alleged incident. As some cases involve lengthy legal proceedings, the fees are paid as they are incurred rather than after the conclusion. It also covers all defence costs even if dishonest or fraudulent acts are alleged.
negligently or innocently. They could face prison if an act is considered a criminal offence. They can even be disqualified and prohibited from holding any managerial or directorial position for some time – an outcome that can damage their reputation and credit history permanently.
Investigation of complaints
The department of trade and industry’s companies investigation branch considers complaints against thousands of companies each year. Directors and officers, past and present, are legally
Insurance represents a significant financial outlay for most SMEs, so it’s important to ensure you have adequate cover to meet the specific needs of your business. A broker who specialises in your sector will be able to make the right recommendations that are appropriate to you.
Details: Julian Hilton 0118-9839800
julian.hilton@jelfgroup.com www.jelfgroup.com
uncertainty within the Eurozone is beginning to be felt across the corporate finance arena. Yet again banks are suffering from large hikes in their costs of capital and global businesses are beginning to sit on their hands, keeping their balance sheets strong and making sure they can ride the storm. Unfortunately we will all be living in ‘interesting times’ while the Eurozone tragedy plays out.
Details: Kirsty Sandwell 01293-591775
kirsty.sandwell@
bakertilly.co.uk www.bakertilly.co.uk
THE BUSINESS MAGAZINE – THAMES VALLEY – DECEMBER 11/JANUARY 12
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