Favourable tax conditions for individuals and escalating interest in UK companies from overseas trade buyers will make 2011 the best year for entrepreneurs to sell their businesses since the recession began, according to dealmakers at Clearwater Corporate Finance. The announcement comes as the firm reports a 47 per cent increase in deal value in 2010 compared with 2009.
Phil Burns, managing partner at Clearwater, said: “2011 presents a great opportunity for entrepreneurs to realise the value in their businesses. Pricing is stabilising and tax conditions for individuals are becoming increasingly favourable. Crucially, private equity houses still have large funds to invest in strong businesses and we are likely to see even more competition between them for the best sector targets this year.
“Another key advantage for entrepreneurs with strong balance sheets is interest from overseas corporates. Large companies from the Far East that have outgrown their home markets are keen to gain a foothold in Europe – where many would rather acquire than expand organically – while Western European companies are increasingly looking to target the UK for established acquisition targets with complementary propositions.”
The total value of deals that Clearwater advised on rose to £556 million in 2010, compared with £378 in 2009. This increased the firm’s average deal value to £24 million compared with £22 million in the previous year. Clearwater advised on 24 transactions in total in 2010.
The most active sector for the firm in terms of volume was support services, accounting for 40 per cent of deals. Clearwater also advised on three transactions in each of the technology, healthcare, consumer and chemicals sectors.
52 per cent of deals that Clearwater advised on had some form of private equity involvement. 63 per cent of trade sales advised on by the firm went to cross-border acquirers.
Key deals that Clearwater advised on during the calendar year included the secondary buyout of XLN Telecom by ECI Partners; the sale of specialist teacher recruitment business, Teaching Personnel, to Graphite Capital; the sale of DCC Plc’s mobility and rehabilitation business to Patterson Medical Ltd., the UK subsidiary of US-based Patterson Companies Inc.; and KCP’s significant minority investment in Dwell, the contemporary furniture and home accessories retailer. In its largest deal, the firm advised residential property specialist, Adam Lawrence, in securing a £100 million funding package – including a £50 million equity investment from Graphite Capital – to support the development of his new house building company, London Square.
Burns commented: “Despite testing economic conditions, we have remained highly focused on our deal origination strategy, utilising our wide network of corporates, private equity houses, funders and advisers – both in the UK and overseas. To support this, we have made notable investment in our research function over recent years, which has been key in supporting the origination process. We have also remained focused on M&A transactions rather than diversifying into restructuring work. This strategy has paid off and is reflected in our growth.”