‘It’s a sellers market’ say top advisers
DEAL volumes featuring North West advisers rose 17% in 2015 to 538 amid a trend for more cross-border transactions and greater levels of inward investment.
This is a according to the North West and Manchester annual corporate finance review produced by data company Experian with pro.manchester and New Economy.
Regarding 2016, advisers expect “another solid year” of activity driven by trade and private equity deals, but expect to see the EU referendum impact the first half, in a similar fashion to the run up to the general election in 2015.
There was consensus among a panel of corporate financiers that it is a “sellers’ market” with some attractive multiples around – as recently evidenced by ECI Parners’ 5x return on its investment in Wilmslow-based professional services company Citation.
Jonathan Boyers, head of corporate finance in the north at KPMG sounded a note of caution, stating there are “one or two clouds on the horizon”.
He added: “I just think that the market is very buoyant for sellers at the moment with well attended auctions, a racy debt market and high pricing. There are signs though of an M&A market nearing its peak for pricing and with the recent market correction, led from Asia, throwing a question mark over global economic confidence together with quite a few continuing geo-political uncertainties there are suggestions that the inevitable turn of the cycle is likely to be upon us in the next couple of years.”
Mark Clepham of EY said that even in a downturn, “exceptional businesses” would be sought-after assets.
Turning back to the current market, Phil Adams, chief executive of investment bank Altium, said it is the “best time ever” for private equity firms to raise funds, which is driving up prices.
“Yes it’s competitive, but these guys have to spend their money.”
Oliver Tebbutt from Deloitte said there is clear evidence of in-bound M&A activity from the US. “The North West is winning more than its fair share of investment from American corporates and fund, which is a positive, particularly for companies looking to break into the US market.”
A second panel of advisers, comprising: Jonathan Diggines of EV Group, Ryan Bevington of Maven Capital Partners, Jeremy Cole of Cole Associates and Andy Leach of NVM Private Equity, all agreed 2015 had been a strong year in the SME/ owner-managed business market.
There remain some challenges, not least in the funding for smaller businesses. Diggines said: “The S- of the SME
market does still struggle to raise finance from bank and private equity.
Asked about recent comments from former Financial Services Authority chairman Lord Turner, who has warned of “big losses” from the peer-to-peer lending sector, all agreed that a careful approach is to be recommended.
Cole said the sector was a “bit like the Wild West”, while Bevington fears some deals are “accidents waiting to happen.”
Diggines said: “I think last year peer-to-peer lending amounted to between £1bn and £2bn – which sounds a lot, but is not a lot when you think that banks are lending £25bn less to SMEs.”
