Time to come out of hibernation?
Anything Goes

Guarded Optimism

I don't think that we are alone amongst corporate finance advisers in seeing a better flow of enquiries since the last quarter of 2009.   What drove this?  Probably that existence of slightly more liquidity in the system, slightly better economic news , but above all recovering business confidence. 

Business confidence ICAEW Q12010 The  Institute of Chartered Accountants in England and Wales ICAEW publishes a business confidence monitor.    This clearly shows confidence on the slide before the recession hit - but the graph finally turned positive in Q4 of 2009.    Pretty much at the same time as interest in m&a began to recover.

This makes sense as the decision to sell your company, to invest hard earned cash in a management buyout, or to buy a business needs one to have a reasonably positive view of the future.

Mergermarketq42009The data from MergerMarket also supports this with a slight upturn in volumes after a long decline from a Q2 2008 peak.    Quite an interesting graph which shows the rot setting in with Lehman's, a last mini peak just before the change of capital gains tax rules, and then a steep fall until Q4 of last year.  

If things stay positive, and the politicians don't  mess it up - big assumption I know - then I would expect the deal volume curve to continue to creep upwards.    For example our intake of assignments since Q4 2009 and Q1 2010 will take a few months to reach fruition.

Company sales can take between 3 and 12 months to complete - and the general experience at the moment is that transactions are taking longer to close then pre recession - buyers are being more careful, conducting longer and more detailed due diligence for example.   Similarly while management buyouts can be swift - we have one about to complete that has been running for more than a year.

For owner managed businesses there is also some comfort to be taken from the fact that the fall off inMergermarket volume to 2009 deal volumes has been proportionately less pronounced than at the mega deal end of the spectrum.  

 The chart - again from MergerMarket shows that deals in the €250 to €500M range were down to only 35% of their peak levels by the second half of 2009, deals in the €5 to €15M range were at 45% of their peak level but those with value undisclosed (which in reality includes many of the "local" or owner managed business transactions) were at 65% of their peak numbers.

Its hard not to resort to overworked cliches but one might sum all this up - as did MergerMarket as "tender green shoots".   Given all the macro economic concerns guarded optimism might be better.

With all this in mind we are running a series of seminars entitled Business Exit Strategies.  

These are lively and informative and cover Selling your Business, Managing Succession, Management Buyouts, Mitigating Tax, Grooming, and Exit Strategy.   

Invite cropThis spring we are running events in Norwich, Peterborough, Cambridge and London.   For more details including brochure, full program and information on how to book please have a look at our website events pages. 



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