Deals boom likely but banks too cautious - Forrest
There could be a boom in mergers and acquisitions in the next two or three years as businesses wait for the economy to improve. That's according to David Forrest, partner of Chesterfield-based Ingram Forrest Corporate Finance which is changing its name to BHP Corporate Finance from tomorrow. He also warned banks are still not lending enough and are reluctant to lend to changing owners of firms.
Forrest, who won Insider's Corporate Finance Adviser of the Year at the 2010 South Yorkshire Dealmakers Dinner, said: "Things are pretty good. There's a lot of talk about a double dip recession and there's a real danger we can talk ourselves into one.
"Our business has held up very well - even before Lehmans happened. We have been fairly busy throughout even though the overall market dampened down due to a lack of available debt funding.
"Banks have been very cautious and in my view, overcautious. They tend to operate like a light switch than a dimmer switch - it's either on or off, there's no gray area. That has reduced the M&A marketplace but we have kept fairly busy."
He said banks have been reluctant to lend to changing owners of firm due to potential risks but it is "not as bad as it was". He also said companies which were successful in gaining finance based on their profits were having a "battle with the banks".
Forrest said: "They (the banks) tend to lend a multiple of the business' profit. That used to be, say, £3m or £4m for £1m profit but that is now likely to be £2m."
Forrest said his firm has experienced a "good uptake" in activity in recent weeks though remained tight-lipped on any upcoming business due to confidentiality clauses. But he pointed out past deals which have made the headlines involving his firm.
They have included advising Swiss conglomerate Migros Group on the acquisition of a majority stake in Bradford-based personal care products manufacturer Hallam Beauty, buyouts at Mayflower Engineering and Davy Markham and the sales of Jex Engineering and Crawshaw Butchers.
He said he has kept staffing levels at 12 employees throughout the period and could be in a position to take on more recruits in the near future.
Looking ahead, he can see a possible deluge of deals as companies wait for the storm of the downturn of clear.
He said: "There is a pent-up supply of business and there's a bit of a backlog. There's not going to be a tidal wave (of deals) but they are going to happen over the next two or three years, I would say, if the economy remains stable."
Meanwhile, Ingram Forrest Corporate Finance is becoming BHP Corporate Finance from tomorrow.
When asked why, Forrest said: "It's a natural evolution. We talked about switching to BHP Corporate Finance when we merged (Ingram Forrest Corporate Finance and Barber Harrison & Platt in 2006). We felt that Ingram Forrest name was well-known and kept it for longer than we intended. But BHP Corporate Finance is less of a mouthful."
Ingram Forrest Corporate Finance was founded in Sheffield in 1989 and was among the first specialist corporate finance advisory firms to be set up in the UK. It merged with Barber Harrison & Platt in 2006, which was the largest independent firm of chartered accountants in Yorkshire.
