Was 2015 the year of the billion-pound deal in the East? M&As edge back to pre-recession highs
- Credit: PA
Billions of pounds of corporate cash exchanged hands across the East of England last year, as companies feeling more confident about the economy returned to the acquisition trail. SABAH MEDDINGS reports.
Last year was the 'year of the deal', according to corporate firms.
In the East, 527 deals took place, up from 414 in 2014, and the value more than doubled to £28.51bn, according to new data from Experian.
The buoyant market saw firms looking to expand, and businesses take advantage of the return of international investment and eager buyers.
Paul Warman, partner in the corporate team at Leathes Prior, said he had never experienced such a volume of work as in the past two years, after the country pulled itself out of a long and painful recession.
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'The crash in 2008 caused merger and acquisition activity to drop off a cliff,' he said. 'Business owners felt it was not a good time to sell, buyers feared overpaying for a business and, even if a potential deal was found, banks had no money to lend.
'For a couple of years, transactions were very rare. Even insolvency sales, that were a big feature of the downturn in the 90s and gave corporate solicitors an alternative focus, were rare in the years after 2008, because banks were reluctant to crystallise their losses.'
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He said in 2011 things started to change, with vendors finding a way around the lack of lending, often taking the place of banks and leaving part of the purchase price outstanding as a loan.
With the UK economy outstripping many other countries, UK businesses became popular with overseas acquirers, from India, China, the US and other European countries.
A frenzy of activity in the oil sector came to a halt with the drop in the oil price, but Mr Warman said the gap was filled by growth in the technology sector.
However Mr Warman said he had learned from the past. 'More than ever before, events in Berlin, Shanghai, Syria, North Korea can have a rapid impact on the proposed sale of a company in Downham Market.'
And Birketts partner Greg Allan said there had been an increase in outside international investment.
He added: 'With low interest rates banks have got a lot more appetite to fund acquisitions and are increasing asset-based lending.'
And he said it was not necessarily a bubble that would burst in 2016.
For specialist corporate advisory firm JDC, there has been a return of willing sellers coming to the market, understanding they can drive a better deal for their company than previously.
The new deals were sparked by a growth in the economy.
Senior team member David Howes said: 'All of that pent up desire to be doing mergers and acquisitions stuff on a smaller, owner-managed business level released. Everything started to free up again.'
But founding director Jon Dodge said there was a greater level of scrutiny than before the recession, and banks were no longer as prepared to advance three or four times a firm's cash flow.
'If you have been running the business over the last 10 years you don't forget the experience,' said Mr Dodge. 'They are rightly more cautious, but it doesn't mean the appetite for expansion has gone.'
He added there had been boost to private equity deals, particularly from the US.
'Over the last couple of years the amount of interest in private equity in this region has grown significantly,' he said.
In the East, law firm Mills and Reeve topped the law firm league tables in a deal review from Experian, advising on 41 transactions.
Norwich-based corporate partner James Hunter, who advised on the merger between Poundland and 99p Stores late last year, said the market was as strong as it had been for a number of years.
But he added: 'There is a feeling that nothing will last forever. The Brexit debate is likely to soften the market as we come through the year.'
The headwinds of China's stock market worries and concerns over Iran and Saudi Arabia could surface later in the year.
Is your firm being impacted by international events? Call Sabah Meddings on 01603 772879.