Banks are open for business for private equity funding
Simon Pilling, corporate partner at Bond Dickinson also says though that the time frame for getting through the credit process reflects a more cautious approach
How will Brexit uncertainty affect sales of UK private equity backed businesses?
It will have some impact on confidence and decisions as to whether it is the right time to sell or buy. That said, if the fundamentals of a business are strong there will always be a private equity buyer out there if the management team are worth backing and the price is right.
Are corporates willing to spend more money than private equity companies on a buy out?
We sometimes see a premium being paid for a strategic purchase and inevitably a trade buyer is more likely to find synergies that might encourage it to pay more than would be the case for a financial purchaser. But it is not always the case and clearly there will often be an appetite from a management team to favour a financial purchaser and do a buy-out themselves.
Is bank debt difficult to obtain for private equity houses and does it impact investments and returns?
In our experience the banks are well and truly open for business though the time frame for getting through the credit process does seem to reflect a more cautious approach in making sure all the right boxes are ticked before they lend. Additional caution will mean the bank multiples are inevitably lower so the increased funding requirement from private equity will clearly impact returns.
The introduction of the new EU state aid rules has restricted the activities of venture capital trust (VCT) managers. How does that affect younger companies?
The VCTs would have tended to focus on smaller deals or earlier stage investments so inevitably these changes might make access to capital harder for some younger companies. On the other hand we have seen new entrants over the last couple of years, both institutional funds and an increase of private capital, who have been plugging this gap as well.
What trends do you see in the private equity sector?
More focus on self-origination of proprietary deal flow to pre-empt the competitive auction processes.