Ask the Expert with Lee Humble: Do you know what you are buying?

This article was written by Lee Humble

M&A markets have been moving at break-neck pace for some time and, as an adviser, I work with multiple clients who have braved COVID conditions and have emerged in good shape, with a large number now pursuing acquisitive growth strategies.

Several of those parties have acquired businesses previously and have a good awareness of the process and prevailing risks, and naturally those who have not executed such a strategy can often pursue an objective with limited awareness of what to do and how to proceed.

An acquisition can be a great way to grow your business

For those looking to acquire right now I would advise them that acquisitions can be a great means to grow your business by providing access to new products / skills / services, allowing you to penetrate new markets and territories, providing access to a supply chain you may not possess at present, provide extra band width and infrastructure generally and allow you to tender for new works with a new type of customer – the list goes on. Synergies and integration planning are items which should be considered at the inception of negotiations and crucially should be reassessed throughout the process.

Know why you are acquiring a business

Key to the success of an acquisition is your purpose – why do you want to acquire and what is the reason why a specific target company is the object of your desire. The commercial reasoning can often appear obvious – but it is important to also consider the wider implications. An example being the reaction of key customers and suppliers who may often have a legal entitlement to terminate relationships upon a change of control. 

How well has the target business traded over the last 12 months?

From a financial standpoint, it is now even more imperative to look at trading performance- how has the target truly performed over the last twelve months? Can you see how COVID has impacted the business, in both positive and negative ways. Is the supply chain still intact, what action has been taken – from the use of the job retention scheme through to accessing government supported lending and use of tax deferral? Due diligence around this can be exceptionally revealing and can also guide the post transaction planning which you will need to consider. Some of the learnings may also guide change in your existing business; systems mapping and data integration being areas where common practices may provide significant benefits across the enlarged post transaction group.

Understand the risks

Similarly, during your diligence process you will grasp a better handle on the true risks residing in the target company. Knowing where those risks sit will ultimately then allow you to set the most optimal structure for acquisition purposes – as well as guiding your solicitors and other advisers through the legal documentation aspect of the process.

In short, acquisitive growth can be a great means to expand your business and current markets are rife with such activity. Understanding, agreeing, and articulating the rationale behind why such an objective is being followed will be key and seeking advice from seasoned dealmakers can yield huge advantages.

Contact

For further advice, please contact lee.humble@taitwalker.co.uk

Source: Insider

Our team win Corporate Finance Advisory Firm of the Year at the North East Dealmakers Awards 2020

Our Corporate Finance team are delighted to have won the Corporate Finance Advisory Firm of the Year award at the North East Dealmakers Awards 2020!

The award is for the corporate finance firm based in the North East judged the most outstanding in advising North East-based businesses on completed transactions during the qualifying period (1st August 2019 – 31st July 2020).

Our Corporate Finance team had a very successful qualifying period, being involved in 26 transactions, including the two largest deals in the North East during 2020. The judges were impressed with the clear focus on client relationships during the COVID pandemic, as well as meeting the growing demand from private equity for Data Analytics.

Steve Plaskitt, our Corporate Finance Partner, said:

“Winning this award in such a hard year due to the pandemic and everyone having to work remotely is a true testament to the hard work, commitment and team work of the Corporate Finance Team. I’d also like to thank all of our clients, and everyone we work with. This has been a real team effort and I am delighted to be recognised amongst such distinguished peers in the industry.”

We advised on deal for North East road builder, Northumbrian Roads

Our Corporate Finance team and Legal experts from Muckle LLP have helped Northumbrian Roads to join forces with one of the UK leaders in road building.

The North East road maintenance contractor was sold to part of a global construction group as part of its strategy to build its presence in the infrastructure sector.

Prudhoe’s Northumbrian Roads Limited is a road surfacing and highway maintenance contractor with a strong presence in the North East market.

The acquisition is part of the buyers’ strategy and will allow the company to strengthen its position as it seeks to gain market share in the major infrastructure schemes it believes will be needed as part of the economic recovery following the Covid-19 pandemic.

Northumbrian Roads, which has depots at the Port of Tyne and the Port of Sunderland, was established in the late 1980s by the late John Lynch and his business partner George Barton.

Among the high profile contracts, it has been involved in was the re-surfacing of the Wearmouth Bridge in Sunderland last year.

Our Corporate Finance team and commercial law firm Muckle LLP supported Northumbrian Roads in a deal that ensures the business will continue to grow under their new ownership.

Sean Lynch, Owner, from Northumbrian Roads said:

“Ever since the company was founded by my father John Lynch and business partner George Barton over 31 years ago, we have progressively grown the company, focusing on strong relations with our customers, teamwork and innovation, complemented by the highest quality materials and a first-class service.

The take-over process was made smooth and the legal and financial aspects were carried out in such a professional manner by both Muckle LLP and MHA Tait Walker that we had confidence that we were doing the right thing for the company to move forward.”

Steve Plaskitt, our Corporate Finance Partner, led the disposal team and Adrienne Paterson provided the taxation advice to the sellers in readiness for the sale.

Steve said:

“It is great for the Lynch family to be able to sell their shares and to see the company their father founded many years ago become part of a larger group and to continue to serve the North East. I am sure the business has a very bright future.”

Muckle LLP’s corporate lawyers Matthew Walsh and Sara Worsick advised the sellers on the legal aspects of their sale, with commercial property advice from real estate lawyer Deborah Lazenby.

Matthew Walsh, corporate partner at Muckle LLP, added:

“We’ve advised Northumbrian Roads for many years and it is no surprise that the company has attracted the attention of a national leader in its field. It is a very well-run business and, with the added support the acquisition will bring, I’m sure it will continue to thrive within our region.”

Lee Humble

Lee joined MHA Tait Walker in November 2019 as an Associate Partner in our Corporate Finance team. Lee has more than 15 years of professional services experience. He has worked in a number of different roles across banking and corporate finance sectors, both in London and in the North.

Lee will work with the Corporate Finance team to provide transactional, strategic, growth and funding solutions to businesses across the region.

Global dealmakers : Cross-border M&A outlook 2019

Our international network Baker Tilly has released a global survey on cross border mergers and acquisitions (M&A).

The survey of 150 dealmakers based in the UK, Europe, the Americas, Asia and Australia asked for their views on a wide variety of dealmaking issues. The collated results can be found here, and they make an interesting read for UK business owners.

Key findings

  • Over three quarters of respondents looked at their domestic market as being most attractive and would focus on this more than looking overseas for acquisitions.
  • One third of respondents believe that the risks posed by cross border dealmaking are more than outweighed by the opportunities that the right deal represents even in the current climate.
  • Two thirds of overseas dealmakers believe that the mid market is most attractive (defined as deal values of between $15m and $500m) as they are often more flexible and easier to align with the overseas investor.
  • Key drivers for overseas M&A are responding to trade barriers and tariffs (77%), reaching new customers (75%) and acquiring new technology or Intellectual Property (73%).
  • Dealmakers are most concerned about regulatory hurdles (81%) and post merger integration issues (77%) when doing cross border deals.
  • Ongoing issues surrounding Brexit negotiations are an issue for 32% of respondents and partly for this reason only 4% percent of respondents were looking to UK to acquire businesses; this was the lowest of all the European countries and only investment in Japan was less attractive.
  • Despite Brexit uncertainties, the UK was attractive to overseas investors for its reliable infrastructure (100% of respondents looking to invest in the UK stated so) and for the valuations of its businesses (75%).  
  • Furthermore despite our sometimes negative self-perceptions of our economy, over 20% of respondents believed the UK was attractive for its availability of skilled labour and 30% for its political stability and legal certainty.

Our regional activity

These findings support the experiences of our Corporate Finance team’s regional activity.  In the last four years, we have advised on seven completed deals involving international buyers and predominantly they were to acquire new products/technologies and to access new markets.  Whilst the EU Referendum results did cause a couple of deals to collapse in 2016, there has been little obvious impact since, especially as the subsequent weakness of Sterling has made UK businesses more appealing to overseas investors.

Finally, from the UK business owner’s perspective, an overseas offer is no guarantee of successfully completing a deal as overseas investors still have to undertake their due diligence.  In most cases this involved legal, business ethics, tax, environmental, commercial and human resources reviews in addition to the usual financial and technical due diligence. The intense nature of these due diligence process reflects the findings that 55% of respondents say that they have had a cross border deal collapse.

Contact us

If you would like to discuss finding overseas investors, please contact Steve Plaskitt on 0191 285 0321.

We have welcomed a new Associate Partner to our Corporate Finance team

We are marking a successful year for Corporate Finance with the appointment of our new Associate Partner, Lee Humble.

Lee has 15 years of professional services, banking sector and Corporate Finance experience, having spent time in London and the North West. He brings experience as a finance director and business owner.

Lee will work closely with our Corporate Finance Partner, Steve Plaskitt, and the rest of the team, to provide transactional, strategy, growth and funding solutions to businesses across the region. The team will work with our newly established Data Insights team, to build on our existing service offering and help businesses use their data to drive strategy and value.

Lee said:

“I love the transactional environment of corporate finance and the varied experience that I have gained over the years plays well into this role. I’ve always been an admirer of MHA Tait Walker and I’m really excited to tap into the expertise they have here and the wider service offering across tax, accountancy and Wealth Management.”

2019 has been an award-winning year for our Corporate Finance team. Our recent work with the management buyout of Fabricom Offshore Services Limited achieved Deal of the Year at the Insider North East Dealmakers Awards and the team have completed a total of 11 deals across the year.

Michael Smith, winner of this year’s Insider’s Lifetime Achievement Award, will continue to support the Corporate Finance team with his 25 years of experience in the specialism. Michael will continue to strategically work with the team and our clients.

Steve Plaskitt said:

“It’s been a fantastic year for the corporate finance team and it’s been great to work with businesses across the region and help them to achieve their business and personal goals.  

“Moving into 2020, we’ll be working with our in-house data insights team even more to really help businesses to understand their financials, drive value and strengthen their business strategy.

“Graham Dotchin is head of our Data Insight team and when it comes to transactions or planning for future sale or growth, the team are focused on helping shareholders to increase value for every outcome. They also help clients to drive up things like profit ahead of fundraising, sale and other significant projects, as well as working on long term and short term business strategy”.