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In Focus: Half-term deals review
Phew, it’s August. If you’re a corporate financier, it’s time to go on holiday; if you’re a journalist, it’s time to work out who in the industry deserves a holiday. Joking aside, the summer is a good time to evaluate how the year has shaped up for our dealmakers and what’s in the pipeline.
It certainly started better than 2009. Work that gained traction at the back end of last year continued to make the headlines in the early days of January when much was made about the dual track process to sell Pets at Home. The private equity market was looking for a shot in the arm and the £955m deal proved, yet again, that great assets will sell whatever the market. It’s the biggest cliché in corporate finance, but it’s true.
For the stock market, gutted to lose out in the final seconds, it signalled a raft of scrapped initial public offerings as volatility still reigned in the square mile. But, again, for the right asset (and all that) it is a still a good place to be. This was proved by the flotation of Blackburn’s Promethean World in March. The company signalled in late 2009 and saw the move through when others walked away.
But these were really anomalies in a market where volume remained subdued compared to previous years. To look for trends, for the shape of things to come, we have to look much wider than the North West. One of the most exciting "ones to watch", depending on how you look at it, is the march of overseas investors. These are companies and investors driven by strong balance sheets that are viewing the current market conditions as an opportunity to make strategic purchases. Growing businesses with strong management team can also still be sold for an excellent multiple, which has been driven, in part, by the historical weakness of sterling.
One recent example is online car rental agency Travel Jigsaw, which is now part of US giant Priceline.com. Another is India’s Ashok Leyland acquiring a stake in the operations of bus builder Optare. Last year, deals included the acquisitions of Liverpool’s Henty Oil by Miami-based World Fuel Services and TVS Logistics’ takeover of regional engineering business Multipart. I could go on.
Looking ahead we expect this trend to continue and it’s not just Prime Minister David Cameron in India that prompts that prediction. If the private sector is expected to lead a recovery, then overseas investment opens up new markets and creates greater support structures for expansion. It also enables emerging markets to acquire the "quality" systems and technology available from UK companies. Simple, really.
Elsewhere, we are hearing of renewed momentum in the local deals market. Now the election is out of the way, word on the street is that instructions for new business have increased, acquisition strategies are being rolled out with volume expected to show a slight return. When this will be is another matter. We all know that it takes a long time to get deals over the line at the moment.
In the meantime, watch cash rich overseas investors, especially those from emerging economies, pick off their targets one by one.
Rupert Cornford, deputy editor, Insider
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