Increased activity

The first half of 2010 has seen a marked increase in corporate finance activity. Baker Tilly has had its share of the increased MBO activity and appetite for funding, advising on several deals that have completed recently, including:

• The MBO of Best Practice Network; a Children’s Services professional development provider
• The MBO of a direct mail services business
• The MBO of Enterprise Resource Planning software business Kerridge Commercial Systems, backed by NVM
• The MBO of Ascend, a provider of aerospace information and consultancy, backed by LDC; and the MBO of the UK’s leading photographic equipment distributor.

Corporate Transactions

In addition to increased MBO activity, a growing number of larger businesses are looking for appropriate acquisitions. Recent examples involving Baker Tilly include the acquisition of the London Fertility Centre by leading private healthcare provider, Spire Healthcare, who is backed by Cinven, and the £20m purchase of Essential Travel by Thomas Cook.

Additionally, there is a noticeable increase in interest from overseas potential purchasers looking for strategic acquisitions, especially given the current exchange rate. Baker Tilly has several such transactions in the pipeline but the most recent examples are the French National Lottery Operator, Française des Jeux acquiring LVS, a gaming technology business, in a £10m deal and the joint venture between SWEEEP Limited, a specialist UK waste recycling business and Kuusakoski Oy, a major global recycling business based in Finland.

Funding – understanding what the banks need

Bank funding is still a talking point but there appears less uncertainty now regarding availability than six months ago. Unfortunately some companies still believe they have an automatic right to be granted funding regardless – rather than positioning their requirement to be attractive to a bank – which is itself a business and needs to control risk.

Funding is almost certainly available for sensible propositions where they have been suitably positioned with appropriate management information and projections. We have been able to raise debt funding for all assignments in the last year and recent deals suggest that the ease of obtaining funding is gathering pace. However, the general perception remains that funding is not available but our experience is that many funders are crying out to see more, better quality proposals that they can lend to.

Fundraising and Equity investment

In contrast to the banks, perhaps due to the lack of available funding perception, venture capitalists have seen an increase in opportunities and business plans and have a strong appetite to invest. A number have indicated that they feel 2010 will be the year to go back into the market and are expecting a sharp rise in the number of transactions. 

The sectors that have been attracting high levels of interest include healthcare, renewables/ recycling and recruitment. However, support for other sectors continues such as the recent additional capital invested into Gymbox, the health club business as well as Ascend and Kerridge mentioned earlier.

Capital markets & AIM

Although 2009 saw a significant delisting of many of its smallest companies, AIM ended the year a stronger, but significantly streamlined, entity. Indeed, it could be said that 2009 was the year that AIM came of age, showing its ability less for the volume of its IPOs, and more for its continued support of existing quoted companies, particularly for secondary fund raisings which were well supported by investors.

Summary

We believe that the outlook for corporate finance activity remains positive with increasing investor and funder appetite alongside growing trade buyer interest. In addition the extension of entrepreneur’s relief has improved the CGT position for many potential sellers.