The next year offers the greatest opportunity for UK owner-managers in recent memory. Andy Currie, London-based Managing Partner of Catalyst Corporate Finance (pictured below), says there is more choice now for business owner-managers than there has ever been in his career.
Whether it be in private equity funds, in credit funds, in the public markets, or on corporate balance sheets, there is a huge amount of capital chasing a home, he says. That gives owner-managers choice when it comes to considering their options.
Six reasons for the year of opportunity
- Significant levels of available capital
- An influx of inbound investment into the UK
- Interest from international acquirers, particularly from the US
- Changes in the banking and debt markets
- Unrivalled breadth of choice for private businesses
- A vibrant corporate finance industry
In terms of the fundamentals for the next 12-18 months, the corporate finance market is in reasonable shape due to the sheer volume of capital in the market, he adds.
This will have an impact on the way the market moves as there is more and more competition from private equity, from credit funds, from family offices – everyone is chasing yield across their portfolio. In turn, this volume of capital is driving up valuations.
“While there’s a lot of noise that goes with the election of Donald Trump in the US, I do think that he’ll prove to be net beneficial for the UK because I think that he will see us as an easier, more straightforward trading partner than the rest of Europe,” he comments.
Banking and the debt markets
“There has been a fundamental change in the debt market over the last five years. Prior to the financial crash, our senior debt would have been provided by one of the four high street banks: Barclays, Lloyds, HSBC or Royal Bank of Scotland.
“However, post the financial crash and post recent European banking legislation, we have now seen over a hundred credit funds set up with a focus on private businesses.” If an average fund has £1 billion to deploy, there is a huge amount of firepower in the market.
This means that owner-managers have choice. They have the freedom to decide whether they want to sell their business now and get the maximum price in the current market. If so, they may be focused on trying to find a strategic trade acquirer or a private equity house.
Owner-managers have choice
- Sell now
- Raise capital
- Sell later
However, if they want to raise some capital, either for cash out to shareholders or as development capital within the business, then they may well look to secure that capital from a credit fund.
This option simply didn’t exist five years ago, he states. “As advisers, it gives us another angle to discuss with our clients – they can generate capital without giving up control and that is key to some owner managers.”