Tuesday 12 March 2013

Cash is King

This week we have a guest post from Oliver Hoffman, National Head of Corporate Finance at international accountancy and advisory firm Mazars and based in the Leeds office, UK. Oliver explains the surge in M&A activity he is seeing in his local market...

Oliver Hoffman,

Read any paper and you'll be convinced that the M&A market is in the doldrums. To some extent this is true. Bank lending to support acquisitions is much harder to obtain now than it was in the peak of 2007/8. Deals are therefore fewer and, as most corporate finance advisers will highlight, they are taking longer to cross the finish line.

But it is not all doom and gloom; the last two years have been the best ever for my team in Yorkshire and 2013 is set to be stronger still. Our mantra has been a simple one: 'follow the money'. When selling businesses, for example, it is not enough to look for a buyer with a strategic rationale for buying. Good intent simply doesn't get deals done. Buyers have to be sitting on cash or have easy access to it to make the purchase.

We vet buyers' financial wherewithal very carefully and this has paid dividends for our clients. Our deals have happened quickly as the buyers have not been beholden to third party credit committees which are unpredictable in nature and invariably lengthen the transaction cycle.

Has a good price taken a backseat when delivering a speedy deal for clients? In our experience, far from it. The benefit in talking to buyers that are both strategic and well funded is that they are usually prepared to pay well to get hold of an asset that takes their business forward.

International buyers fall squarely into this category. They have been the highest price bidder in around half of the sales we have handled in the last two years. There is an abundance of cash globally looking for an investment home and buyers see value in the UK market.

The M&A market has become increasingly international, a trend which we see continuing. Indeed, we are currently advising two Yorkshire based clients on sales to overseas buyers.

With regards to my outlook for the future, I am optimistic. Our pipeline has never been stronger.

Oliver Hoffman

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