32 corporate finance
Think long-term, but act now
As companies look to grow, owner-managers face a number of fundamental decisions which will ultimately shape the future of the business. For example, when might that strategic merger or acquisition be best timed? When are you likely to start considering an exit from your business? Or, is your business ready to invest heavily to take it to the next step?
There are several other similar business questions you could ask, but if your answers involve corporate finance and timescales in single figure years, then you would be well- advised to start preparing now, writes John Burbedge.
At least, that’s the advice of RSM Tenon corporate finance partner Darren Miller.
“Deals are taking much longer to complete, so people need to plan further ahead.“
He gave examples of deals that have tripled in duration from an average of six months to 18 months.
“It’s not necessarily the difficulty in finding deals, as there is a growing appetite, it’s just that this is a cautious market. The detail in deals is now crucial. There is finance available, but it’s not so easy to come by. Nowadays, the market reality, the new norm perhaps, is that everybody wants to be more certain before they commit.“
This means there is more emphasis on ’numbers and forecasts’, says Miller. “Businesses now need to pass muster at every stage.“ Due diligence activities now definitely have a capital ’D’ and a whole host of aspects such as valuations come under intensive scrutiny.
These austere times have forced all businesses to be more focused on their ’numbers’, having become lean and strong enough to survive the recession. Some are cash-rich, others would like to have the resources to progress, all are cautious.
“It isn’t an opportunistic M&A market; you really have to work out your strategy and timing.“
Through its RSM International global links, Miller says his team has become increasingly aware of US and northern European enthusiasm to purchase UK assets, and a willingness of such funders to be more competitive than many private equity houses. “The thinking now is also around longer-term funding options.“
As an experienced corporate finance professional, Miller says his best current advice for clients is to “be realistic, be patient, but above all be prepared“.
Planning and preparation is now 75% of the deal, adds Miller. “People really do need to ensure they get all their ducks in a row.“
It goes without saying really that businesses are ill-advised not to take professional advice
www.businessmag.co.uk Recent RSM Tenon deals:
• Acquisition by management, via newco Verde Horticulture, of UK subsidiary of German horticultural cooperative Landgard GmbH.
• Sale of Solent-based ship repair business Testbank Holdings to Burgess Marine.
• Sale of print and design specialists PDI (Europe), Basingstoke, to national print manager Pavilion Print Management, Leeds.
• Acquisition of testing company The Environmental Laboratory by Southampton based Sigma-HSE.
• MBO of City Motor Holdings automobile retail businesses, together with Gowrings of Basingstoke based in Newbury and Reading. Deal backed by specialist turnaround investor RCapital LLP.
• Sale, to Bags of Potential, of Newbury- based bag and key ring importer/ distributor Dinks and Dinks (USA).
• Sale of Eastleigh-based electronics business IGT Industries, to AIM-listed engineering company Stadium Group.
Darren Miller
to help them prepare, present, check and agree deal processes. And, as always, choose proven talented advisers.
“We have a strong and successful conversion rate on deals, and I think one reason is that RSM Tenon designs its corporate finance services to be delivered by partner-led teams of experienced advisers. We work very closely with the client, giving straightforward, no-nonsense advice. And, our partners really do roll up their sleeves and work alongside clients in order to provide high-quality support.“
This team approach and focus on detail also gives the client confidence (buyer or seller) when presenting deal details. “The most powerful messages in any deal come from members of the existing management team or company owner,“ adds Miller.
As a parting shot to the interview, Miller suggested another business question to prompt immediate planning for the future: “How long do you think interest rates will stay as low as they are?“
Mahmood adds talent and ’energy’
Tallat Mahmood has boosted the national energy sector experience of RSM Tenon’s corporate finance team.
Joining recently as an associate director, based in Reading and London, Mahmood previously worked at Epi-V, an oil and gas global energy fund backed by Lloyds Development Capital (LDC).
Mahmood will be part of RSM Tenon’s lead advisory team on M&A, working closely on transactions with Darren Miller and Steve Brown, national head of private equity.
Before Epi-V, where he was responsible for full management of deals and assisted development and execution of board level strategy, Mahmood spent four years at a ’Big Four’ accountancy firm.
Details: RSM Tenon offices
Reading – 0118-9530350 Basingstoke – 01256-312312 Southampton – 023-8064-6464
www.rsmtenon.com THE BUSINESS MAGAZINE – THAMES VALLEY – JUNE 2013
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