Date: Tue 16th November, 2010
Venue: Mercure Hotel, Povey Cross Road, Gatwick Horley, RH6 0BE
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Sponsors: ASB Law, Baker Tilly, Matrix
Insider gathered together five high profile corporate finance professionals to discuss what funding options are available for South East businesses to grow.
Panelists:
Mark Fahy: senior manager for UK company services, London Stock Exchange
Andrew Killick: head of corporate in the South, Baker Tilly
Russell Bell: senior partner, ASB Law
Jonathan Gregory: director, Matrix
Mark Percy: head of corporate finance, Seymour Pierce
Mark Fahy of the London Stock Exchange began the event by giving a brief overview of the benefits to companies of getting listed on the Stock Exchange and outlining a case study of Dominos, which floated on AIM in November 1999. When it joined Dominos had a market capitalisation figure of £25m and they had 200 outlets. They grew on AIM and then joined the main market. Net profit has gone from £13m in 2007 to £30m in 2009 and the company now has over 620 outlets and is valued at £625m.
The first question of the morning came from George McBrown, managing director at local manufacturing firm G&B Electronic Designs. McBrown was looking to grow his business in time for retirement when he would hand it over to his daughter. He asked: “I’m planning to double my turnover in the next four years by way of acquisition and growth, what are the options for financial backing?”
Jonathan Gregory of Matrix kicked off the panel’s response: “You’ve started in exactly the right place as you have a plan and you know where you want to get to. So often, companies come to us with an immediate need for funding, but businesses need to plan four or five years in advance.”
Andrew Killick of Baker Tilly added: “There’s lots of different aspects to plan and businesses should act now. There are funds available for businesses that are ready to grow but you have to think about how you want to grow and look at what funding options are appropriate to you.”
Russell Bell of ASB Law congratulated the business on its forward thinking approach and said: “It’s great to see that you have a family succession plan in place as so many businesses don’t have that these days. You’ve got a double whammy of growth through your plans now and your family’s ambitions in the future.”
The next question cam from Pallab Chakravorty of Maxwelton, who asked: “Given the present economic climate and in light of current interest rates, what are realistic expectations on return on investment for high net worth or private equity investors?”
Gregory advised: “Over the last three years our expectations have dropped. You have to look at exactly what kind of business you are investing into. Is it an established business making profit with a good long-term track record? These are definitely more interesting right now than brand new businesses.
“I think investors have got a bit of an issue at present as they’ve got lots of cash but they can’t get a return, so they are having to take lower returns. This means it’s better to invest in two or three projects rather than just one.”
The discussion then moved on to the Stock Exchange and Fahy was asked to comment on the pressures getting listed brings to a company. He said “It can be relatively expensive to be on AIM or the main market and although the initial cost is relatively high, a lot of companies use it as a tool to raise finance. The cost of raising finance this way can often be a lot lower than other methods and it is more time effective. Funds can be raised fairly quickly compared to other methods.”
The panel was then asked what the current market conditions were like for initial public offerings.
Mark Percy of Seymour Pierce said: “This year we’ve had 60 or 70 companies coming to market, and I expect this to continue to increase next year. The majority are showing good to very good premiums. Those that are coming on at sensible pricing are doing very well.”
Finally the panel was asked what they believed would be the dominant type of financial requirement through 2011. Gregory said: “Over the last two years businesses have gone back to basics and thought more about what they are actually about and they are now thinking about where they want to be in the next five years. They are planning and thinking about how they are going to get from point A to point B. Part of that will be to sell parts of the business or find finance. That should in theory generate some more transactions, however, it’s difficult to say exactly what will happen next years.”
Bell added: “Businesses have emerged as leaner, stronger and more well-rounded. The dominant financial requirement going forward will be cash. Cashflow will also help businesses raise funding.”
Event sponsored by:
ASB Law, Baker Tilly, Matrix