A recent investigation by Investec Growth & Acquisition Finance showed that 27% of UK corporates with an annual turnover in excess of £10m think their companies are likely to make an acquisition in the next 12 to 24 months, down 10% from the same survey taken 12 months ago.
The survey revealed that 61% of these planned acquisitions will have to be supported through additional funds, which leads Investec to conclude that many firms will find their ambitions frustrated by the liquidity crisis.
John Clifford, Investec, explains: “A reduced appetite for lending amongst traditional banks is likely to have a profound effect on the ability of UK corporates to achieve their growth strategies over the next six months to a year; and possibly longer. Yet for good businesses, there will still be funding options available, particularly amongst the more niche mid-market lenders.”
Only 24% of companies said that their first stop for funding growth would be the debt markets, while just 3% would use public equity markets. Thirty-four percent of companies would approach private equity firms.
Forty-three percent of those companies owned by a private equity group or another financial institution are likely to make an acquisition according to the survey, and 77% are likely to grow organically over the next two years.
Clifford continues: “The mid-market has so far remained the most resilient part of the market in terms of M&A activity volumes and financial sponsors that are focused on this market are still doing deals.”