Dealmakers downbeat but corporate activity set to continue
MEMBERS of the region’s investment community are becoming increasingly downbeat in their future predictions for corporate activity, according to a new report.
A survey of 100 leading dealmakers on both sides of the Pennines conducted by business advisory firm Deloitte shows that more than three quarters of respondents expect deal volumes to fall in 2009.
More than 95% predicted that prices would reduce while 70% says that the number of deals actually reaching completion would drop. Around 80% said they expected the recession to last at least 18 months.
However, Yorkshire respondents were more bullish than their North West counterparts, who saw the year ahead as even more bleak for the deals market.
Moreover, only a quarter of firms said they expected to cut the size of their teams showing that the region still believes it has a future as a deal making centre.
Martin Jenkins, Yorkshire and North Wast head of corporate finance with Deloitte said: “It suggests that people expect to sustain a level of business even if the transaction volumes aren’t there, and is indicative of a shift in focus to protecting and driving value through existing investments.”
Mr Jenkins said there were some notable changes in 2008 compared the previous year – most notably a trend towards working on deals closer to home as well as a three fold increase in the deal opportunities considered to take businesses from the public markets back into private ownership.
“There is a clear move towards working on opportunities more locally and regionally rather than further afield, and also working longer and harder to get deals to completion,” he added.
“The rise in respondents considering public to private activity during 2008 is one of the few positive trends from the survey, a trend which seems likely to continue into 2009.”
The survey also predicts that the manufacturing, healthcare, technology media and telecommunications sectors will be the most active source of deals this year.
Predictably, the retail and constructions sectors – central to the region’s deal making activity for the past few years – don’t feature in the list.
Mr Jenkins continued: “The record of private equity investments over the past quarter of a century has shown that some of the best investments are made in a downturn, and with debt funding scarce, and the equity elements of deal increasing, we are likely to see private equity focus on value and opportunistic deals.
“The recession will drive consolidation in some sectors and we expect the strong get stronger, and the weak weaker. For well performing, cash positive businesses it could be a good year to invest and gain market share through acquisition.”
