Ford Campbell found that bank debt was used in just 7pc of the
deals. Almost half the deals (49pc) were funded solely through
cash, with wealthy trade buyers digging into "war chests".
A continuing lack of availability of bank debt had produced
a "revival" in vendor placing, in which an acquirer purchases a
target company's shares through the sale of shares in its business.
The vendor then sells these shares to an institutional investor to
receive a cash payment.
Laura Jordan, head of business and buyer intelligence at Ford
Campbell, said: "Cash acquisitions are leaving the rest of the
market behind as access to bank debt remains restricted for many
acquirers. Although the banks are 'open for business', lending
criteria remain extremely tough and increased regulation is
unlikely to ease the situation.
"To get deals done in [this] space, more alternative sources of
capital are being used, including vendor placing. This provides
another means for entrepreneurs to achieve maximum value from the
sale of their businesses, despite a stagnant funding
environment."
She added that she expected venture capital activity in the
space to recover but that deals would increasingly be "all-equity",
without supporting bank debt. The revival in deals is
"encouraging", Ms Jordan said.
"For those businesses demonstrating secure current and pipeline
revenues, now is a good time to consider an exit."
Source: The Daily Telegraph - Finance (Online) (23rd
August 2011)
http://www.telegraph.co.uk/finance/businessclub/8716775/Cash-buyers-drive-MandA-spike-for-small-businesses.html