West Mids M&A market is "cause for concern"
West Midlands dealmakers have expressed their concerns over the region's ensuing M&A market. Speaking to Insider, LDC's managing director Martin Draper admitted the firm was "worried" about the future of mid-market deals, while Clearwater Corporate Finance's Phil Burns admitted there was "a real concern" about the health of the stock market.
"We're worried because the quarter's ending with uncertainty - summer 2011 is starting to feel like 2008," said Draper. "There are fears about the effects debt crises, problems in the eurozone and volatile stocks will have on dealmaking. Top end debt is already frozen for big deals, and I’m concerned it might come down to mid-market deals."
Over the past few months, deals completed include the £5m management buyout of Ash & Lacy Buildings Systems from Hill & Smith and an MBO at Wolverhampton-based Angel Springs, led by LDC.
Over the third quarter of 2011, several larger deals were completed, but only after drawn-out negotiations lasting a year or more.
Several members of the dealmaking community put this reluctance to complete down to potential buyers demanding greater due-diligence and guarantees before committing to transactions.
"There's a distinct nervousness in the marketplace," said Duncan James, head of corporate services at Shakespeares. "Investors are more reluctant to take on debt in an uncertain economic situation. They’re cautious about progressing strategic growth plans and their ability to service any debt."
Phil Burns, partner at Clearwater Corporate Finance, said: "There’s real concern about the stock market. It's already down ten per cent this year, and if the FTSE 100 goes below 4,500 that'll have a serious impact on dealmaking in this region. Another serious fall will mean potential acquirers having second thoughts and possible vendors thinking again."
Accompanying a flailing marketplace are investors remaining reluctant to lend and taking too long to commit to the funding; meaning many acquisition teams finding themselves short of cash.
"There are real challenges in getting deals over the line," confirmed Deloitte partner Darren Boocock. "It's taking far longer to get them away, partly because of the challenges in getting funding together, the amount of due-diligence now demanded and because there isn’t the sense of urgency, particularly among trade buyers. They know they’re usually the only game in town, so can afford to take their time."
