Quantcast

Frank Carter: How to expand your business and advice on making acquisitions

0

Your business has survived the worst. Now you need to grow – but how, when times are still so tough?

By Frank Carter, partner at KPMG Corporate Finance

As UK businesses, having battened down the hatches and survived the worst of the global economic storm, begin to emerge from the maelstrom and look for growth, the UK economy, on the face of it, seems to offer limited opportunity.  Domestic growth is static and forecasts give little encouragement in the short to medium term.  Businesses will have to widen their horizons to find opportunities for expansion.

Growth is unlikely to come from Europe – only Germany is showing any resilience to the global downturn. Growth opportunities are likely to come from looking further afield to the US and the emerging economies such as India, China and Brazil.  My colleague Matt Lewis, discussed this in his recent introduction to doing business in China

Most businesses are still understandably cautious about their growth agendas. This caution is matched by the banks.   Even long-standing bank customers are facing tougher scrutiny and challenge in securing additional finance.

If you are looking to grow through acquisition, the key question is how to fund those acquisitions. It will be through a mix of cash resources, equity, and borrowing.  In order to access external sources of finance, businesses have to approach growth through acquisition in a sensible, thorough and well researched manner.

More businesses are now talking to us about making acquisitions and we are seeing a steadier, more considered approach from businesses as they assess potential opportunities.  Businesses looking to grow through acquisition are typically taking more time to do due diligence – making sure it is the right move in commercial, financial and cultural terms.

Part of the due diligence process is to consider carefully the question of the availability and pricing of businesses for acquisition. It’s a misconception that there are lots of bargain basement businesses out there waiting to be bought.  There has actually been a limited supply of good quality businesses on the market over the last year or two, so pricing for those businesses has been a lot stronger than is generally reviewed.  Those businesses that have survived and adapted throughout the economic downturn have proved themselves to be valuable businesses, and they’re going to be priced to reflect that.

That’s not to say that opportunistically there aren’t businesses or parts of them that one could look at as a sensible bolt-on, but it pays to be cautious.

One can only hope that we will see some genuine growth towards the end of 2012 and beginning of 2013. That’s what the markets seem to be factoring in as well.

By Frank Carter, partner at KPMG Corporate Finance




Share.