Acquisitions of insolvent businesses in the UK fell in the second half of 2010, according to research by Experian Corpfin on behalf of the insolvency trade body R3. However they continue to account for a significant proportion of all M&A activity in the UK.

In the six months to the end of December, 100 deals in the UK involved companies acquired out of administration or other formal insolvency procedures, equivalent to one in thirteen of all mergers and acquisitions. This compares to 137 such deals in the first half of 2010, or one in eleven of all acquisitions. The number has fallen since 2009 when close to one in nine acquisitions were distressed deals. However, just two years ago only one in twenty six deals involved an insolvent business, reflecting the then market.

Steven Law, R3 President, said: “Insolvent deals have been running at high levels since mid-2008, when the economic problems began to set in. The numbers peaked between mid-2009 and the middle of last year, and have since fallen back to the levels of early 2009. Even looking at the last two quarters of 2010 we can see that the number of distressed deals has dropped significantly; from accounting for nine percent of all acquisitions to six percent.

“Buyers who have had the money have been taking the opportunity to pick up businesses and assets during the downturn while values remain low. The fall in distressed deals in the past six months may reflect the fact there have been fewer insolvencies, and therefore fewer distressed businesses coming on the market.

“R3 members predict that this will be a difficult year for business so potential buyers should be aware that in the run-up to recovery there is still a window of opportunity to acquire businesses that are potentially profitable, but in need of sound management.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

New research from DLA Piper has found that key players in the lending community expect activity in the European acquisition finance market to increase on 2010 levels.

The DLA Piper European Acquisition Finance Debt Survey, which polled a wide range of the most influential participants in the lending and private equity market, found that almost 90 per cent of respondents anticipate recovery in debt market activity in 2011.

With the mood generally optimistic throughout the lending community, the consensus is that most activity will be seen at mid value. Over half of respondents feel that the most active size range for deals will be below £150m, with only 20 per cent believing most deals will be valued at over £200m+.

In terms of capital structure of deals, the DLA Piper Acquisition Finance Debt Survey found overall debt as a percentage of the capital structure of transactions will increase. In 2010 the vast majority of respondents believed that equity would be make up 45 per cent or more of capital structure, this year, half of respondents expect it to be between 45 to 50 per cent. Over 70 per cent (73.3 per cent) said that mezzanine finance for deals will range from 5-15 per cent of the capital structure.

Whilst respondents expect senior debt leverage levels to stay predominantly between 3x and 4x (72 per cent), there is a significant increase in respondents predicting senior debt leverage above 4x (from 0 per cent in 2010 to 20.4 per cent for 2011) and a corresponding fall regarding senior debt leverage below 3x (from 23.6 per cent in 2010 to 8.2 per cent for 2011).

Risk aversion, however, will remain high on the agenda, differences in the insolvency regimes and guarantee/security packages available in different jurisdictions are expected to continue to have a decisive impact on credit appetite, leverage multiples and debt structuring according to 80 per cent of respondents. Equally, when questioned on liquidity of the syndication market for senior debt, 70 per cent feel that they would never return to the peaks of 2007, whilst those few who did think it was possible the majority (71 per cent) anticipate that it will only be after 2013.

Business & Professional Services is anticipated to be the most active sector with a response of 87 per cent. However, there is scepticism, with the Real Estate sector being the least active with only 6 per cent predicting significant deals would be concluded in 2011.

Philip Butler, Partner, Head of Leveraged Finance at DLA Piper, commented:

“A significant proportion (41 per cent) of our respondents found that market activity in the acquisition debt market in 2010 exceeded their expectations and there were many large and mid market transactions hitting the headlines in early 2010, with Pets at Home and DFS. While just over half (53 per cent) of those that took part indicated that activity performed broadly in line with their expectations, only a very small minority (6 per cent ) found that market activity underperformed against their expectations. Since acquisition finance and the M&A sector were two of the biggest casualties of the economic crisis, this is a clear indication that the late 2009 upturn of the market has the potential to translate into a sustainable but sensible recovery.

This year’s responses send a clear message that margins are largely expected to remain at current levels for at least the remainder of 2011, with over 40% forecasting a period of at least one year or longer. Less support was evident for margins remaining at current levels for a shorter period, with 26 per cent predicting margins remaining at existing levels for less than six months.”

Small businesses ended 2010 less confident than they were at the beginning of the year, according to the Federation of Small Businesses’ (FSB) latest ‘Voice of Small Business’ Index.

The report, which looks at the general health of the small business sector, has found in the fourth quarter of 2010 that business confidence fell for the third successive quarter to a net score of -13.2, the deepest decline since the survey began in March 2010.

Overall, the figures show that the private sector recovery lost momentum in 2010, and as the constraints on businesses cash-flow increased from utility bills, fuel duty and VAT combined with the public sector cuts, growth in 2011 is also likely to be sluggish at best.

The severe weather at the end of the year and the rise in VAT to 20 per cent at the start of 2011 have both had an impact of small firms’ confidence, especially those businesses operating in service and consumer focussed sectors such as restaurants, hospitality and retail sectors and those in the transport sector.

The report also shows that small businesses expect employment growth to weaken in the coming months, with 77.7 per cent of small firms expecting to keep employment levels the same, but 12.4 per cent expecting to decrease the number of staff they have – up from 10.4 per cent in quarter three.

The FSB is urging the Government to bring forward plans for growth that includes a competitive tax system to help boost employment and to keep to its manifesto pledge to introduce a fuel duty stabiliser. The Bank of England must also keep the base interest rate at 0.5 per cent to help keep the focus on growth.

John Walker, National Chairman, Federation of Small Businesses, said:

“A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow. This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011.

“With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5 per cent, as once the impact of the VAT rise is excluded, inflation is relatively low.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

Small businesses ended 2010 less confident than they were at the beginning of the year, according to the Federation of Small Businesses’ (FSB) latest ‘Voice of Small Business’ Index.

The report, which looks at the general health of the small business sector, has found in the fourth quarter of 2010 that business confidence fell for the third successive quarter to a net score of -13.2, the deepest decline since the survey began in March 2010.

Overall, the figures show that the private sector recovery lost momentum in 2010, and as the constraints on businesses cash-flow increased from utility bills, fuel duty and VAT combined with the public sector cuts, growth in 2011 is also likely to be sluggish at best.

The severe weather at the end of the year and the rise in VAT to 20 per cent at the start of 2011 have both had an impact of small firms’ confidence, especially those businesses operating in service and consumer focussed sectors such as restaurants, hospitality and retail sectors and those in the transport sector.

The report also shows that small businesses expect employment growth to weaken in the coming months, with 77.7 per cent of small firms expecting to keep employment levels the same, but 12.4 per cent expecting to decrease the number of staff they have – up from 10.4 per cent in quarter three.

The FSB is urging the Government to bring forward plans for growth that includes a competitive tax system to help boost employment and to keep to its manifesto pledge to introduce a fuel duty stabiliser. The Bank of England must also keep the base interest rate at 0.5 per cent to help keep the focus on growth.

John Walker, National Chairman, Federation of Small Businesses, said:

“A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow. This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011.

“With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5 per cent, as once the impact of the VAT rise is excluded, inflation is relatively low.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.