Deal flow remains strong despite credit fears, says Clearwater


The mid-corporate market is still seeing a healthy deals flow, despite fears about the impact of the credit crunch, says Clearwater Corporate Finance.

The firm says that that deals are continuing, even though banks are being more cautious about lending and many deals were concluded early to beat the capital gains tax rise on 5 April.

During the three months to the end of June Clearwater advised on eight deals with a total value of £135 million. Although the figure was down on the first quarter, when it concluded 11 deals worth over £350 million, Phil Burns, partner with Clearwater says it demonstrates that the mid-corporate deals market is still open.

Deals on which Clearwater advised in the second quarter included:

  • The acquisition of Responsive Engineering in Gateshead by its neighbour Exact Engineering
  • The investment by private equity house RJD Partners in Comtec, one of the UK’s leading suppliers of software solutions to travel agents which is based in Cwmbran, South Wales
  • The MBO of London-based DATIX, a leader in the development of risk management and patient safety software for the healthcare sector, which was backed by Bowmark Capital
  • The investment in Carnell Support Services, the Staffordshire-based provider of specialist support services to the highways sector, by Livingbridge

Burns added: “With many deals being rushed through to beat the capital gains tax deadline, and the economic downturn beginning to bite, many advisors were nervous about what the deals landscape would look like after 5 April.

“However it seems the credit crunch is only having a marginal impact on mid-market deal opportunities and there is ongoing demand for good investment opportunities from both PE houses and overseas buyers.

”In terms of the most popular sectors technology remains strong – with software companies particularly attractive – as do travel and support services. However deals are also continuing in areas such as retail, food and financial services which have been hit hardest by the credit crunch, rising costs and the economic downturn. Here we can expect to see further consolidation as struggling companies are bought out of administration.

“Looking forward at the deals pipeline we are expecting an upturn in the fourth quarter of the year as transactions currently in progress achieve completion. We also plan to increase our market share further in 2008/9, even though we expect stronger competition as the bigger firms of advisers attempt to move into the mid-market due to the absence of larger deals.”