Sector Focus:Finance
However, over the past 18 months this has flipped the other way, so why might this be the case? Well, while there is no definitive answer, there are several possible
influencing factors: Firstly, many owner managers that could/should have exited on or before December 2007, but who decided to hold out for higher valuations, thinking the strong market conditions were going to continue, are now 12 years older and in many cases have had endure a sustained period of difficult market conditions during the post 2008 recession. As a result, there are large numbers of businesses
owners well into their late 60’s or in their 70’s, that now need to exit before their business values
diminish.Buyers often want a sensible hand-over period and many deals involve some form of earnout or deferred consideration thus, the older the vendor is the trickier this becomes for both sides. Brexit would appear to be having an impact too. The
and acquisitions I
Merger By Pat Abel (pictured), Corporate Finance Partner at Hart Shaw
t has been a very busy 18-month period for us within the corporate finance department at Hart Shaw. Historically, we work more on buy- side transactions than sell-side, probably around 70% - 30% ratio.
‘Private
on the types of businesses they buy; they must have a strong defensive business model but also allowing further growth over the next three-five years. Private equity now compete head on with corporates for transactions and they are willing, in lots of cases, to buy up to 100% of the equity or a majority stake. So, what does all this mean? If you are an owner manager of a business in the region and you are looking to realise your investment in the short to medium term, then there is no doubt that there are buyers out there for the right opportunities and the cash is certainly available. However, timing is often critical. Planning ahead and
Equity funds are awash with cash’
uncertainty this has caused over an elongated period of time has meant that some owners have gone to the market to find a buyer ahead of the actual outcome of the exercise. Another significant factor is the amount of monies available to listed
companies, that are seeing opportunities to acquire businesses to grow their market share and to use some of the cash they have been sitting on during the recession. Prices are lower than they were pre-recession in a lot of cases so some bargains to be had. Private Equity funds are awash with cash and needing to deploy their funds – afte rall that is what they are paid to do. They will be very particular
considering the options open to you is vital. If your business doesn’t fit the private equity model due to lower growth prospects or not being a market leader in your sector, then you might want to look at the middle management team as a potential exit route in the form of
a management buy-out. If the team is not fully capable of running the business it might be advisable to bring someone in to bolster the team or indeed be the leader of the buy-out?
If a trade sale is the preferred route then look at the business as if you
were a buyer and address all the areas you would expect to see such as improving the general housekeeping and make sure all contracts are in place with staff, customers and suppliers. Buyers typically look at a three-year time horizon when conducting due
diligence, therefore having a progressive set of financial results with a clean balance sheet is essential to the smooth running of a sale process. Consider taking advice early on so that you can address areas that could become issues to a buyer.
Autumn 2019 CHAMBERconnect 89
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