In the second of this three part series, financial journalist James Ashton talks with Adrian Howells, a director in our corporate finance team about the types of buyer's looking to make an investment at this stage of the pandemic.
The video and a transcript of the interview can be viewed below.
The deals market: who's buying?
James Ashton: So Adrian, lots of deals taking place at the moment who's buying?
Adrian Howells: We're seeing all sorts of buyers and a lot of appetite from buyers. The traditional answer I suppose, is we differentiate between trade buyers and private equity buyers - those that you tend to see in the market. But I'd like to also differentiate between those that are buying businesses that are strong and have done well, and are therefore paying what I might call a full price for the business, versus those who have an appetite and interest in businesses that have been struggling and have suffered throughout the pandemic and therefore might be picked up at a bit of a bargain.
James Ashton: And that's interesting isn't it, because I would have thought if you're a buyer looking at some of the companies in some of these sectors, you just wait until these companies topple over before doing the deal?
Adrian Howells: Well potentially, and certainly for some buyers that is their modus operandi, but it's a bit like when you buy a used car, whereby you've got a choice of paying a full price from the previous dealer, or you could buy a bit of a banger and do it up for yourself, and that's going to cost you less money but it's going to take you time and energy. It's the same with business buyers - if you're a big buyer just looking to consolidate as part of your strategy, actually can you really afford to invest the time to fix up a broken business, and often the answer is no.
James Ashton: You don't need the hassle.
Adrian Howells: You don't need the hassle.
James Ashton: So, we hear a lot about this wall of private equity money that's looking to be deployed in deals over the coming weeks and months - what's that doing for valuations?
Adrian Howells: I'm not seeing ceiling levels yet, but I wonder if we might. I think those that are being sensible are looking to invest on an investment thesis, in so far as what was the pricing before the pandemic, and that's sort of where they want to stick with it. Particularly for businesses that are in a strong position post-pandemic, but if you like not due to the pandemic. But speaking to a couple of contacts in Private Equity, they've made it clear that they're now starting to lose out on some deals where the business has done well because of the pandemic, so they would apply a discount to that on the assumption that this business may not be worth anything in six months' time post pandemic - but actually they're starting to get massively outbid by some buyers.
James Ashton: Very interesting. And what about foreign money, Adrian. Are foreign buyers looking at the UK post-Brexit, post-pandemic?
Adrian Howells: We're still seeing a lot of that. So, two of the deals I've completed in the last six months were from overseas buyers. One was an American trade buyer, second a Danish trade buyer. There's lots of interest and lots of appetite to buy into the UK - whether that's linked to Brexit or not I don't know, but certainly we're still seen as a good place to do business and a good place to invest.
James Ashton: Adrian, thanks so much.
Adrian Howells: Thank you.
Originally Published 02 July 2021
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