News - Midlands
If one transaction could sum up everything that went on in the world of Midlands corporate finance in 2006, then it's the sale of Whitworths, a supplier of branded and own label healthy eating snacks to the retail sector.
Way back in the dim and distant past (2001 to be precise), Gresham rescued the business from the grasp of the receiver and completed a £315m buyout of the Northamptonshire business. In November 2006 it sold it to European Capital for £386m after a ravenous auction.
More than a few financiers around town raised eyebrows at the price.
But it just goes to show the kind of prices that can be paid in today's sellers' market. As one dealmaker remarked:
"Local funders looked at it but were outpriced. Is the nuts and snack market really worth so much?"
Whitworths was also symptomatic of the changing processes behind deals. In the old days, bidders would have had exclusivity for several weeks, even months. Whitworths still had four bidders in the frame just four days before the deal was struck. For three sets of advisers that was a lot of wasted energy.
Whitworths was far from the only keenly fought auction of the year, as our round-up of financiers' favourite deals of 2006 overleaf shows.
Nationwide Autocentres, for instance, was sold for £349m in an institutional buyout (IBO) backed by Phoenix Equity Partners. And it wasn't the only deal in the nuts market, with Worcestershire-based Milk Marque buying Community Foods.
How long can this sellers' market last? Matt Waddell, head of corporate finance at PricewaterhouseCoopers in the Midlands, says: "If interest rates continue to go up and banks rein in lending a little then I think all that will happen is that prices will come down a little. Prices will still be competitive though."
He believes the concoction of too much private equity money, a still vibrant debt market, the return of trade buyers and the emergence of property funds as aggressive buyers is creating a heady mix.
"Any business which has considerable property assets such as healthcare, leisure, pubs, bingo or hotels is attracting the interest of the property industry at sums which even the private equity industry cannot compete with," he says.
The trick for dealmakers in 2007 will be keeping deals off market wherever they can and persuading management of the benefits of avoiding a disruptive auction.
However, as Waddell concedes:
"If people are keen to get your assets then management can set the rules."
The auction process has certainly been a key driver in dispersing deals and how they are advised ever wider. As our graph below shows, actual deal flow in the Midlands is its lowest for five years and there is no reason to suggest a reversal in this trend.
So yes, as rainmaker Phil Burns, of Clearwater remarks, a vintage year - but one at very, very high prices.
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Let the good times roll
If one transaction could sum up everything that went on in the world of Midlands corporate finance in 2006, then it's the sale of Whitworths, a supplier of branded and own label healthy eating snacks to the retail sector.
Way back in the dim and distant past (2001 to be precise), Gresham rescued the business from the grasp of the receiver and completed a £315m buyout of the Northamptonshire business. In November 2006 it sold it to European Capital for £386m after a ravenous auction.
More than a few financiers around town raised eyebrows at the price.
But it just goes to show the kind of prices that can be paid in today's sellers' market. As one dealmaker remarked:
"Local funders looked at it but were outpriced. Is the nuts and snack market really worth so much?"
Whitworths was also symptomatic of the changing processes behind deals. In the old days, bidders would have had exclusivity for several weeks, even months. Whitworths still had four bidders in the frame just four days before the deal was struck. For three sets of advisers that was a lot of wasted energy.
Whitworths was far from the only keenly fought auction of the year, as our round-up of financiers' favourite deals of 2006 overleaf shows.
Nationwide Autocentres, for instance, was sold for £349m in an institutional buyout (IBO) backed by Phoenix Equity Partners. And it wasn't the only deal in the nuts market, with Worcestershire-based Milk Marque buying Community Foods.
How long can this sellers' market last? Matt Waddell, head of corporate finance at PricewaterhouseCoopers in the Midlands, says: "If interest rates continue to go up and banks rein in lending a little then I think all that will happen is that prices will come down a little. Prices will still be competitive though."
He believes the concoction of too much private equity money, a still vibrant debt market, the return of trade buyers and the emergence of property funds as aggressive buyers is creating a heady mix.
"Any business which has considerable property assets such as healthcare, leisure, pubs, bingo or hotels is attracting the interest of the property industry at sums which even the private equity industry cannot compete with," he says.
The trick for dealmakers in 2007 will be keeping deals off market wherever they can and persuading management of the benefits of avoiding a disruptive auction.
However, as Waddell concedes:
"If people are keen to get your assets then management can set the rules."
The auction process has certainly been a key driver in dispersing deals and how they are advised ever wider. As our graph below shows, actual deal flow in the Midlands is its lowest for five years and there is no reason to suggest a reversal in this trend.
So yes, as rainmaker Phil Burns, of Clearwater remarks, a vintage year - but one at very, very high prices.
To subscribe to Midlands Business Insider - click here