Duncan Macintosh, Head of Corporate & Commercial
It’s sympathy that I’m after.
There was a time when my life was packed wall to wall with corporate transactions; company sales, business purchases, business sales, company purchases, venture capital investments, joint ventures. They were ten a penny.
A winter darkness, they say (AKA the credit crunch) has settled on those times. But has it? The truth is that deals are still being done. Though it’s easy to see the dark at the moment, there is some light; there are plenty of deals about, but trying to get these deals done presents some novel (for those who don’t remember the last recession!) problems.
1. Valuations; or the seller thinks his business is worth more than it is. This is a hard one to crack. Prices are so volatile at the moment, it is very difficult to find hard ground on which to stand for the few weeks that a deal process necessarily requires. At some stage, one side or the other will feel that the price is wrong.
2. Equity funding; it’s far from certain. Private equity houses have generally been so burned in recent months by the collapse in the values of businesses they bought at the top of the market in the last few years, that all but the most robust have a small (at least) shiver of trepidation at the point when they have to write their cheque.
3. Debt funding; the banks aren’t lending. Or at least, most aren’t. It’s very difficult (bearing in mind all of the above) to get a deal completed on sensible terms when the banks are unclear as to what they are prepared to do. I don’t mean to criticise; they’re just unclear!
4. Forecasting; it’s almost impossible. Trading conditions change on a weekly basis. Many businesses are now re-forecasting monthly, on a three month rolling basis, and still not getting very close to their actual numbers. How do you plan for that in a deal? With great difficulty.
But, deals are still being done. There are cracking businesses out there and money is available for the right deal on the right terms. We’ve just got to keep working at it.
For further information contact Duncan Macintosh T: 029 2047 4488 E: d.macintosh@capitallaw.co.uk
