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South East Dealmakers Winners Round Table

Insider celebrated the South East Dealmakers Awards by gathering together some of the region's top rainmakers for a roundtable at the offices of Close Invoice Finance in Brighton. The key comments and pieces of advice from the panel are here. For full coverage of Insider's South East Dealmakers Awards 2012 click here

Attendee Key Thoughts 

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Simon Addis, HSBC

We’ve had a very good start to the year in terms of pipeline, but I think it’s going to be like 2011 when it started well but went very quiet over the summer before picking up again.

Trade is still out there and when deals do go to private equity we find there are a few PE houses out there with funds and deals will go to auction.

We’re giving more and more house views to PE houses thinking of going in, something we haven’t really seen before. However, we see a lot of trade buyers come in and outbid the PE houses.

We’re seeing a lot of US interest in deals here: I’m working on a few at the moment which will more than likely go to US PE houses than stay in the UK.

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Daniel Bastide, Thomas Eggar

We're busier than we've ever been. Are things taking longer to get over the finish line? Yes, we are hearing people's frustrations, though by the time the deals get to legals a lot of the delay issues have been overcome and things are moving pretty fast.

What is notable is that so far this year we have closed two US-based acquisitions, which indicates that the dynamic of US corporates coming over here in a way that we've never see before really is happening

The other dynamic we've noticed, although it's anecdotal, is that often when a deal has gone to private equity PE has nothing like the trade sector in terms of the finance needed to get the transaction completed.

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Mathew Glentworth, RBS

My work in progress (WIP) list is busier than it’s ever been, really showing positive signs.

We have noticed that management buyouts (MBOs) are coming back, which either shows there’s some growing confidence in management teams or that business owners are taking the bull by the horns and structuring the exits themselves. I suspect that some MBOs have come about after the vendor has gone to trade, drawn a blank there, and then gone back to the management team and created maybe a two staged exit.

One of our biggest frustrations is that applications for lending are down by 17 per cent. That does have a relevance to the M&A market, because it indicates that confidence still isn’t there that people don’t perceive credit as being available from banks. I’d like to change that perception: if we get people to change their mindset over the accessibility of credit we’ll see more confidence, more deals and that should be self perpetuating in creating more deal activity.

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Jonathan Grant, DMH Stallard

The general tone is that this is a fairly flat market. There are deals happening, but it’s not the easiest environment in which to get things done. In particular we’re seeing two types of deal emerge - those shining stars that want to come to market because they’ve got a good story to tell and good quality assets. Those are really popular. But we’re also seeing a number of companies that need to be sold, either because a private equity house wants to divest itself of ageing assets or because a corporate needs to dispose of non-core businesses.

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Rob Harris, Close Invoice Finance

The volume is there but getting deals through to completion is a much more extended process, for a whole variety of reasons. Each deal seems to have its own dynamics and challenges.

You get the sense that there has been something of a mood change over the past two quarters that seems to be making deals a little more straightforward. The demand is there, but when push comes to shove there seems to be a lack of confidence needed to get things completed, that now is the right time and to take out new facilities to get things away.

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Chris Price, Matrix

It’s getting the commitment to transactions that’s the problem. We’re getting lots of positive feedback in the early stages of negotiations but taking that through to completion is a major issue as they seem to lose confidence quite quickly. It really is a client management job to get them to stick with the process.

The other place private equity has done well is in the failed trade process, where we can step in as the white knight to save a deal with a different type of transaction, but again some people seem to be losing faith quite quickly.

There is a lot of money out there for corporate transactions but it’s not spread out as much as it used to be. By that I mean if you are a star performer you can get real interest in your business. But if you’re not, and even if you have a really good business it’s often hard to get even a rich corporate interested.

Over the last 18 months we’ve moved from providing just private equity finance to providing senior debt and invoice financing to help get deals underway. It’s an sensible option given the lower numbers of deals that are taking place and allows us to use cash that might otherwise be sitting unused in the bank.

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Rupert Rawcliffe, Grant Thornton

The difference between the US and UK is that about this time last year there was a huge wave of uncertainty in the US, which feared it was going into a double dip recession. But at the back end of the year they convinced themselves that they were coming out, and confidence picked up. It’s been the reverse in the UK with all the euro uncertainty, which is impacting upon the SME market. That’s slowing deals down - in that situation you don’t fear that someone will steal your deal, that you’re in a good position.

Why are private equity houses doing deals solo? It’s because they feel they can pay upfront in a strong position and refinance the deal at a later date.

A deal has to have a valid reason to go ahead in this climate – it can’t be vanity or just buying turnover. Companies that do buy are trying to get into new markets or new products for a really good strategic reason.

What we have not seen in this recession are lots of businesses falling over. They’re hanging on because the government has taken steps to keep as many going on as possible. But that’s meant that a lot of businesses that should have been up for sale have not.

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Andrew Rutherford, Centric Corporate Finance

Our deals pipeline is running 25 per cent higher than in the previous year, and we’re seeing more management buyouts than we have since 2007. I’ve also noticed that the size of transactions is increasing, we’re seeing more deals at the higher end.

We do have some frustrations because getting deals across the line, which seems to take forever. Some have been there for a long time and there doesn’t seem to be any real sense of urgency to get a lot of them closed. It’s good to have them there but it is frustrating that they seem to take so long.

The thing that worries me follows a visit to the States last year. Their corporates have more cash than they’ve ever had. They’re making more profits, they’ve cut all their costs over the past few years and now they’re sitting on more and more cash. Soon they’ll start thinking that this is a good time to buy, and I think it means we could see more international buyers coming here from the US, which will mean a reduced number of management buyouts.

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South East Dealmakers Winners Round Table

Date: Fri 2nd March, 2012
Location: Close Invoice Finance, Ridgeland House, 165 Dyke Road, Hove

To find out how you can get involved in an Insider round table, email Rebecca Baron or call her on 0161 907 9718.

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