Bucking the downbeat trend in the mergers and acquisitions
(M&A) market, Midlands law firm Browne Jacobson’s banking team
has seen unprecedented deal activity in the month running up to the
end of the financial year. Having advised on a clutch of deals
worth over £250m in March, the transactions show that the
mid-market is still alive and well.
Among the deals handled by the firm is the sale of engineering
business Concentric, the Birmingham-based manufacturer of oil, fuel
and water pumps Haldex. Other deals include Prohire Group’s
cash-out transaction and Rees Astley’s refinance and acquisition of
Clifford Challinor (Assurance), both of which were funded by Bank
of Scotland. This deal activity has come off the back of a busy
February which saw the sale of Britton's and the investment by LDC
in Omega Red.
Paul Ray, head of banking at the firm, said: “The last few weeks
have been very busy in terms of deal activity, with us completing
more transactions than we’ve ever achieved in such a tight
timescale. In fact, March and April 2008 has seen some of the
strongest deal activity we’ve experienced since the turn of the
millennium.
“This is due in part to the ‘concertina effect’, where deals
planned for the final quarter of 2007’s financial year have fallen
into 2008 as banks looked to maintain their balance sheets pre the
2007 year end and as deals planned for April and May 2008 were
dragged forward to before the 5 April 08 CGT changes. Certainly,
despite all of the media comment about the impact of the credit
crunch, we have seen little evidence of this in mid-market in Q1.
Some evidence of tightening in the mid-market is starting to
emerge, but generally there is positive optimism around.”
Despite the high level of deal activity seen at the end of the
financial year, Paul Ray is wary that banks will look more closely
at potential deals as the overall effect of the macro-economy
begins to bite.
He said: “Clearly, we are seeing a dent in overall consumer
confidence, especially in markets such as retail, leisure and
travel, where we are seeing early signs of lower demand for these
products and services. Accordingly, while banks are tending to look
harder at growth predictions and management teams, they are still
keen to invest in businesses that can demonstrate a solid return on
investment.
“While there is a certain caution in the banking market
about where the economy is heading, businesses and buy-out teams
should not be pulled into despondency by doom-peddlers. Clearly,
while some parts of the economy are facing tighter times, this
presents growth opportunities for strong and well funded
businesses.”
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