UK plc planning an M&A spree by 2012.
75% of companies in this year’s Baker Tilly 2009 Owner-Managed Business (OMB) Survey are merge or acquire in the next three years.
Rob Donaldson, Head of M&A and Private Equity at Baker Tilly said funding flexibility is important: “While obtaining finance is clearly difficult there is funding available provided you understand where to look. Between the various government initiatives, the slowly healing banks, and the mountain of private equity funding sitting on the sidelines, money can be found."
The dark side of opportunity
The stark downside is that over half of respondents predict further redundancies and expect sales to fall over the coming year. The survey of more than 300 board directors of companies with a turnover of £5million to £50million across all industry sectors, reveals that 51% predict further staff cuts over the next year and 55% expect this year’s operating profits to fall. Equally, 38% expect to acquire within three years while 35% want to establish a jv and 21% plan to expand abroad in the same timeframe.
The survey clearly shows it is the larger businesses that are the most optimistic about the future in the next 12 months: 46% of businesses with a turnover of £50 million or more expect an increase in sales; 23% of the smallest firms (turnover under £10 million) are the next bullish, expecting an increase in sales; mid-tier respondents - £21million to £30 million turnover - are the most pessimistic, with over half expecting their sales to fall.
The winning models
Donaldson said that large firms are often better capitalised and in a stronger position to cope with a slow down: “On the flipside, smaller firms can be more nimble and quicker at adapting to changing economic conditions. It is those in the middle that need to consider where they can tighten up and improve efficiency for their ongoing success.”
The OMB survey reveals that despite reduced sales and waning profits, a shift-to-thrift approach is leading to leaner and fitter business models. It will be these businesses that will be in a strong position to take advantage as the markets improve and reverse the current situation. All UK sectors are being affected by the downturn, with property, transport, retail and industrial products hit the hardest.
Laurence Longe, National Managing Partner, Baker Tilly, said he'd advise board members to ensure they have strong business plans in place, show discipline when executing it and react quickly to any change in circumstances.
"There are still very real threats posed by the recession but there are also opportunities to create stronger companies that will be better placed to take advantage of the recovery when the time is right to do so,” said Longe.