If you read all the newspapers and watched the round-the-clock TV coverage following the Brexit vote, you’d be forgiven for feeling pretty terrified about the days of darkness that were predicted to soon envelop us.
To put it mildly, Brexit generated a number of worries - and it would be foolish to suggest they have all gone away - but to date, in the corporate transaction market, concerns have largely proven unfounded. M&A activity tends to reflect the national economy; confidence in growth leading to an increase in deals. After a short-term negative economic reaction to the Brexit decision on 23rd June, the economy rebounded strongly supported by the Bank of England and a quick change of government.
DMH Stallard has seen continued high levels of activity through the summer and into Q4. The capital markets remain active, although we have seen more deals using cash shells on AIM to fund acquisitions.
Project finance continues apace, with infrastructure related deals remaining buoyant; typically these provide long-term investment yields. Our mid-market M & A volume remains strong with plenty of pipeline deals. This suggests companies with money and private equity investors are keen to acquire for growth; sellers are no longer willing to sit on their hands. With business leverage relatively low, the fundamentals appear to be good. For most sectors growth is difficult to generate organically. The banks continue to lend and to support MBOs and competition for new business is increasing.
We suspect that confidence will be knocked at different stages over the next couple of years, as seen by the recent drop in currency values, but provided a stable platform is maintained and confidence built, positive M&A volumes will continue unaffected. As always robust businesses in good sectors with professional management teams will remain those best able to command top prices.
Here are our top tips to make sure your company is in the best shape possible to make the most of the unexpected positive market conditions.
Top tips for raising finance to expand
• Have a clear business plan recognising risks in the economy;
• If your business is safe from Brexit risks explain that;
• Ensure your business plan includes contingencies for different levels and speed of growth;
• Understand the finance alternatives. Private equity, business angel/crowd funding, debt/bank facilities are all different in their impact and effect.
Top tips for selling your business (or extracting value)
• Can you find a buyer from your own contacts or do you need help?
• Take advice early as good preparation increases value;
• Understand buyer concerns - exchange rates may make an overseas buyer an option, but you may need help identifying them;
• Buyers risk profile is heightened; you can deal with that, but drifting into a negotiation without preparation is a big risk.
Head of Corporate