Deal opportunities abound in North West market

 

You could be forgiven for thinking that we have been here before with talk of green shoots, but the last couple of months have seen us begin a number of conversations with clients and potential clients contemplating transactions.

 

We need to be careful that this isn’t simply a ‘Spring Effect’ on confidence levels.  However, the conversations we are having feel like they might be hinting at something a bit more substantial.

 

Although the funding environment for SMEs across the region continues to improve, it is by a series of small steps rather than any fundamental change in funder or, rather, credit committee appetites.

 

Any improvement in M&A activity, or the potential for such, doesn’t therefore seem to be being driven by ‘easier money’ but rather more by other factors.

 

These will include ageing shareholders who have weathered the storm of the last few years and are perhaps thinking about cashing in now whilst they have the health and energy to enjoy their wealth; businesses deciding that they cannot defer a new investment forever and there comes a point at which they feel they simply have to act; and still others who might just be seeing the first signs of recovery and want to be in the best position to profit from this.

 

As ever, the regional picture is varied and certain sectors have been more attractive than others to funders, investors and acquirers. Arguably, a very clear example, and one which is particularly relevant to the North West given its focus upon this sector, was the sale of MB Aerospace Ltd to the US based investor Arlington Capital Partners Ltd in March 2013.  This suggests that there is national and international recognition that there are some extremely high quality businesses and supply chains in the region.

 

But it’s not just the heavyweight established sectors and businesses which have shown potential.  Most of the economy is based upon smaller SMEs and many of these have demonstrated their ability to act swiftly and have identified growth opportunities by understanding what their customers need and offering a cost effective solution.  Pavement Testing Services (PTS) £250k growth funding from Lancashire County Council’s Rosebud in December 2012 is one such example. It is also important because it shows Lancashire County Council’s commitment to helping fill the perennial funding gap which exists for SMEs. This isn’t just a regional funding gap. It is a UK wide one and has been there for some time.

 

While there is much to cause concern, there is also a palpable sense of optimism, albeit guarded optimism, across businesses in the North West.