There is no doubt that the recent tougher financial and economical climate has painted a gloomy picture for some businesses, which are struggling to cope with rising costs, an economic downturn and a reduction in available credit.

However, in any market there are always opportunities for growth and companies planning to expand could find now is the time to look for acquisitions, according to leading Kent accountancy firm Horwath Clark Whitehill (HCW).

According to the Office for National Statistics, the number of deals reported for acquisitions in the UK by UK companies in the first quarter of 2008 was the lowest recorded since 2003. Although there may be less deals happening, HCW believes that doesn’t mean there aren’t good opportunities available especially for small to medium size enterprises (SMEs).

Geert Struyven, a Corporate Finance partner with HCW, which has Kent offices in Tunbridge Wells and Maidstone, said people may be wary of M&A activities due to the current credit crunch but advised that businesses with an eye on the future could look at the present as the perfect time to consider acquisitions.

He said: “The current financial conditions mean that some businesses may be struggling to cope and now could be an opportunity to look at your competitors and take a bigger share of the market, reduce competition or look to diversify in a new direction.

“Professional advice can help draw up a list of targets and begin the negotiation process. For firms that are well-run and structured now could be a great time to begin expanding their businesses.

“The credit crunch has severely impacted the large deals market, where the numbers are large and you need a number of banks to commit and where valuation and lending multiples reached dizzy heights only a few months ago, but I don’t see it killing off the smaller transactions up to £50 million to the same extent.”

“What is undoubtedly true in the current economic climate is that unsecured borrowing is becoming increasingly difficult to obtain and is getting more expensive. Lending criteria are tougher and it is unlikely these will be relaxed in the short term. The banks are very choosy about what they’ll look at. However, most banks still have an appetite to lend and targets for individual bankers remain bullish. There is no doubt that the right opportunity, i.e a strong management team with a compelling story will still attract funding.”

There are many reasons and advantages to grow a business and start looking at acquisition targets. These include:

• Consolidation - This can reduce competition and obtain economies of scale. A new business will come with a customer base and one may be able to benefit from significant synergies. Savings can be made on costs and overheads through shared marketing, human resources and IT budgets as well as increased purchase power.
• Accessing new expertise - It is often cheaper and less risky to buy in new innovative expertise or technologies rather than developing them yourself.
• Industry convergence – Retain and strengthen customer loyalty by providing a wider range of products or services to existing customers.

Geert added: “Companies should not be afraid of M&A in a downturn as now is a great time to be look at acquisition opportunities. There will be fewer bidders and you will hence have a better opportunity to spend more time with the Target and to carry out detailed due diligence. With the correct professional advice and contacts, there are a lot of opportunities for businesses to grow and make the most of the credit crunch.”

Contact Geert Struyven on 01892 700200 or e-mail geert.struyven@horwath.co.uk

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