Deal makers must remain focussed, warns Crowe Clark Whitehill expert

Creativity in deal making will again be at a premium in 2013, according to a sector specialist.

Andy Kay, Corporate Finance Director at the Midlands office of national audit, tax and advisory firm Crowe Clark Whitehill, said that some groups with cash are now “actively seeking acquisitions as a key part of strategic growth”.

But he cautioned: “It will still be a difficult market and the need to be creative in deal making will remain.

“Funding should ease a little and private equity will certainly assist, for example, the banks’ Business Growth Fund. There will be more acceptance of earn out and deferred deals with vendors and they will need to demonstrate stability and longer term visibility to command best prices. This has proved to be tricky in an uncertain climate.”

Sales would be the result of more retirement propositions, corporate divestments, the offloading of underperforming divisions, private equity looking to realise those investments made during the credit crunch at a time when bank debt-funded deals dried up and insolvency practitioners coming to the fore through increased appointments, early options and accelerated processes.

Mr Kay said that buyers would include well-funded corporates with cash; private equity with swollen funds; turnaround specialists; and trade interests from overseas, particularly the Far East and the United States.

“There will be broadly no change on prices,” he predicted, “Albeit there will still be a healthy premium for acquisitions that make a strategic difference.”

Finance will be the result of internal resources, equity fund raising, bank debt focussed on providing working capital and some vendor-initiated deals largely funded by the vendors themselves.

“It is difficult to say what sectors will be most active.” he said.

“Retail will be difficult and we may see a number of forced disposals.

“Good quality manufacturing and industrial companies will always be in demand as will businesses with interesting and proven technology protected by intellectual property.”