Deals market starting to recover, expert panel says
LEADING North West dealmakers say the market is recovering from last year’s slump, but will take up to five years for values to return to 2008 levels.
KPMG’s Jonathan Boyers, Paul Lupton from Deloitte, Christine Adshead from PricewaterhouseCoopers and Ken Williamson from Ernst & Young were speaking at an event organised by pro manchester to launch the Manchester Corporate Finance Review for 2009.
There was a consensus that deal volumes will return to previous levels, but not values, due to a more cautious lending policy by the banks.
There was agreement too that high quality, well performing businesses, like Cheshire-based Pets at Home – which was sold to US buyout firm KKR for £955m -would continue to command good prices.
Discussing the prospects for this year the panel said there had been tangible signs that the market has improved, but also changed.
Jonathan Boyers said: “Last year there was a lot of stress and distress. There has been an improvement as vendors who perhaps looked at selling two or three years ago, return to the market.
“I think though there’s a reluctance to run wide auctions and I think there will be more off-market deal. I’m seeing private equity coming back to life as well and am generally feeling quite positive about the next 12 months.”
Paul Lupton said advisers had to be more selective and to try find strategic buyers for assets: “From a pretty low base last year, there is more corporate and private equity appetite for deals, and more confidence too.”
Despite the improvement in the business environment Christine Adshead said concerns remained about the outcome of the general election, tax rates and the impact of public spending cuts on the economy.
Ken Williamson defended the banking community, arguing: “Banks are getting shocking PR at the moment, but I think the issue is there’s more a lack of good businesses wanting to borrow money than a lack of bank credit.”
On the issue of the general election the panel agreed that a hung parliament would be the worst option for the economy and the deals market as it would cause further uncertainty.
All agreed that aggressive action was needed to cut the national debt, sooner rather than later.
The results of the 2009 Corporate Finance Annual Revenue – which was produced by Corpfin for pro.manchester reveals:
Manchester-based advisers worked on 214 corporate finance deals in 2009. Of the 105 deals where the value was revealed, the combined deal value was £1.9bn;
The value was 39% fall in the number of deals and a 71% fall in the value of deals on 2008, when there were 355 transactions (171 with values disclosed) worth a total of £6.6bn;
Unsurprisingly small cap deal – transactions worth up to £10m – saw the most activity in 2009. Of the transaction where values were disclosed this segment saw 69 deals raise a total of £183m. The mid-market – worth up to £100m saw 34 deals worth £1.4bn, while there were just two deals worth more £100m;
The most popular type of deal in 2009 was acquisitions – accounting for 56% of the total market. Given the downturn it was no shock to see a leap in the number of insolvency-related work. In 2008 insolvencies accounted for just 4% of total deal flow. Last year it hit 16%.
