Dealmakers expect recovery to continue

DEALMAKERS had a much better year in 2010 as a degree of confidence returned to the market.

In the North West, a handful of big deals stand out, with the £955m sale of Pets at Home to KKR, the £2bn takeover of SSL International by Reckitt Benckiser, and most recently Peel’s proposed £1.6bn sale of the Trafford Centre to Capital Shopping Centres also stand out

From a publicity perspective the extraordinary sale of Liverpool Football Club in October – will have few rivals anywhere.

AIM-listed newcomer Daisy Group, award winning entrepreneur Matthew Moulding’s Hut Group, both expanded rapidly in the year thanks to bold acquisition policies and an ability to integrate quickly.

There was little local activity on the public markets to write home about – prompting North West deal-makers to cast their nets further afield, with law firm Cobbetts in particular enjoying recent success in with Hummingbird Resources, a Liberian mining company which joined AIM this month valued at nearly £90m.

Promethean World – which last year won plaudits for its track record as a growing private equity-backed business – made a less than auspicious start to life as a listed company.

Shares in the Blackburn-based classroom technology supplier have slumped from 200p when it floated in March to 62.25p after it warned that government spending cuts in Europe and the US were hitting orders.

Andrew Thomas, managing director at investment bank NW Rothschild in the North West and one of the lead advisers on the Pets at Home deal said: “I think 2010 has been better than many had expected. It is clear that the banks will support the right deal and the buyers will compete quite aggressively for high quality assets like Pets, Survitec, Republic, Hobbycraft and Kath Kidston.”

He said there had been a deteroration of sentiment in the last quarter of this year due to the woes in the Irish economy and fears over the rest of the Eurozone.

“It has certainly tightened the banking market over the last six to eight weeks.”

Looking into 2011 he is expecting stronger levels of both corporate and private equity activity.

“There’s a lot of private equity money around – the funds raised in 2006 will need to be invested – so I am expecting more activity in the small, mid-cap and large sectors.

“Speaking to the advisers around town, people seem to be busier, and we’re reasonably buoyant going into the New Year. There are of course some issues in the economy which are going to pose some challenges I’m sure.”

Jonathan Boyers, head of corporate finance in the North at KPMG is also reasonably positive about this year and next.

“Overall we’re pleased with where ended this year – we advised on 17 transactions across the North – seven of which were Private Equity deals, ranging from Card Factory at the top to Antler.

“There are now more corporate buyers in the market place with funds to acquire across a variety of sectors, and we’re getting a lot more unsolicited calls – which is a big change from the early part of this year.”

Looking at 2011 Mr Boyers said it may still be difficult to get transactions across the line: “With VAT going up the consumer is going to be nervous and the economy quite challenging, but we expect this to ease by the end of the year and the M&A market will be in a real recovery rather than a precarious one.”

Mike Reeves, partner at Clearwater in Manchester, is also cautiously optimistic for the new year, with interest from international trade buyers and business owbers looking to take advantage of Entrepreneurs Relief.

“I don’t think we’ll see a double dip – despite the impact government spending cuts will have on unemployment, we expect the deals market to continue to improve in 2011.

“I still think there are challenging times ahead, and there is no questions that’s things will be tough for some time, but there is a mood of optimism which will continue to drive confidence, and confidence will lead to more activity and growth

“Tax conditions for owners are extremely favourable, low cost credit is widely available to larger strategic buyers and pricing is improving. These factors should mean next year will prove to be a good time for entrepreneurs to unlock value in their businesses.”