Midlands deals market: a pipeline of opportunity
There is no doubt that these are interesting times for the Midlands deals market, says Stuart Sewell, director at KPMG.
The last 18 months have seen our corporate finance advisory team extremely busy across the region. Our pipeline in both the East and West Midlands has been strong, with figures at their highest for many years; highlights including deals like GCI Telecom, CM Downton and M&J Evans.
Brexit: new opportunities
Although we can’t ignore that Brexit is around the corner, on the ground it doesn’t quite feel like anyone is calling time on transacting yet – on either the vendor or buyer side of the coin. Despite this, we do feel that in 2019 there will be a pause in the launch of processes as business owners take stock of Britain leaving the EU and what it will mean for the future. However, we’re confident, that in the long term, Brexit will actually open up new opportunities in the deals market, as both buyers and sellers revise their strategic plans.
The foreign exchange rate has meant it has been cheaper to buy British businesses than ever before, and interest is high from overseas in high-performing Midlands companies – particularly from the US. There are also many businesses who simply don’t rely on trading with EU companies and that is adding to their value. The strong fundamentals of a good quality business will always remain of interest to a strategic buyer or a financial institution, and this is what continues to attract buyers. Add to this the fact that private equity houses are sat on substantial piles of cash they are under pressure to spend, and we have seen a very buoyant market in the Midlands.
A family affair
There is no magical formula for completing a deal of course, and every business will face different challenges as they go through either the sale or acquisition process. Family businesses are a great example of how each deal should be taken at face value. When the owner or owners of a family business are looking to sell, there is more often than not an emotional bond with the staff they are leaving behind and a natural tie with an organisation they have probably been part of for their entire working life. All family businesses are unique, and for many sellers it is the end of a long journey, an actual sale is often more about what kind of individual or group is buying the business and not entirely about how much for. All of these factors combined make working on successful deals involving family businesses some of the most rewarding work we do in the corporate finance team.
Preparing for sale
Most business owners will only go through the deal process once and they need to make sure they are as prepared as possible to make their business attractive to suitors as they can be sure that any potential buyer will do their homework.
It’s relatively straightforward for large corporates to do their due diligence in-house as they will have dedicated teams, but the SME owner trying to sell his or her business will often be wearing several hats at once. This is where our corporate finance team can help, and it’s imperative that any buyer has easy access to well presented, robust information on the selling company as and when they need it. A deal can easily fall over if a buyer thinks the vendor is somehow trying to bury bad news. A seller really has to buy into the fact that they are doing just that; selling their business and enabling a deal to progress smoothly.
We’re confident, then, that the deals market will remain healthy in the Midlands in the medium term. Corporates are sitting on substantial pots of money, debt is cheap and interest rates are likely to remain low. Whatever Brexit brings, we believe that the entrepreneurial spirit of the region will mean our team will remain busy completing deals on behalf of successful companies.
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