Despite fears that the current climate of tightening credit markets will impact heavily on UK businesses, and especially corporate transaction pipelines, two-thirds of companies with an an
Despite fears that the current climate of tightening credit markets will impact heavily on UK businesses, and especially corporate transaction pipelines, two-thirds of companies with an annual turnover of GBP10m or more insist they are currently either adequately or even under-geared, according to a new study commissioned by Investec Private Bank’s growth and acquisition finance division.
Just 14 per cent of companies admit that they are currently over-geared, according to the survey. Even in the private equity sector, 49 per cent of firms with private equity owners consider themselves to be sufficiently well geared as to not warrant concern.
More than 37 per cent of companies say they are still likely or very likely to acquire another business over the next 12 to 24 months. Of these, 76 per cent of those that are likely and 97 per cent of those very likely to make acquisitions rate their balance sheets as currently either adequately or under-geared.
‘This study shows that on the whole UK businesses, whether private equity-backed or not, appear to have robust capital structures that are not over-geared, giving them the appetite and ability to make further acquisitions,’ says John Clifford of Investec’s growth and acquisition finance division.
‘Notwithstanding the heavily publicised turmoil in the large buy-out market, this fits in with what we have seen in the mid-market over the last few months, where the levels of M&A activity have remained relatively high. This activity has predominantly been driven by the higher quality private equity and corporate acquirers who are still buying attractive assets, although this has been offset by a reduction in the quantity of more marginal deals.’
The survey was conducted by independent research agency Continental Research, which carried out 143 telephone interviews with managing directors, financial directors and other senior managers of businesses (PLCs and private companies) with an annual turnover of more than GBP10m.
Investec Private Bank’s growth and acquisition finance division provides entrepreneurs, management teams and private equity houses with asset-based lending, mezzanine finance and minority equity investment. The division offers growing mid-market companies finance for implementing acquisition and organic growth strategies.
Investec Private Bank is part of the Investec Group, which offers onshore and offshore services from offices in London, the Channel Islands, Switzerland, Ireland, South Africa and Australia. The bank’s core activities are growth and acquisition finance, treasury and banking, specialised lending, structured property finance, investment management and trust and fiduciary services.
