UK SMEs are hungry for acquisitions but lack
takeover experience, presenting an opportunity for asset-based
finance to offer cash-flow protection, according to Venture
A study by the invoice and asset-based lender
found one in ten small and medium-sized businesses plan to acquire
competing companies in 2012.
Nearly 80% of these potential purchasers have
never acquired another business and a third admitted to being
unsure how to buy or sell a business.
Steve Websdale, managing director of
Structured Finance and Invoice Finance (South) at Venture, said:
“For those businesses that have weathered the last few years well,
the time may be ripe to reap the rewards now with competitive
“But many of these ‘first time buyers’ will
need a helping hand to make sure they take the best financial and
structural approach to strategic acquisition.”
The study found a third of the 500 owners and
directors of UK SMEs surveyed claim they have no idea of how to
engage in an acquisition or merger and 36% said they would not know
how to structure the financial side of an acquisition.
Nearly two-thirds said they would need
external advice when looking to acquire a business.
Websdale believes there is potential for
asset-based lending to play a part in a prospective flurry of
purchases which, with more than a quarter of those hoping to
acquire a business planning to do so in a year or less, could get
going in early 2012.
“Business owners are looking at opportunities
as they arise, but they don’t always recognise the varied assets
they have at their disposal and how they can be used to structure
an acquisition,” said Websdale.
“As well as their cash reserves, businesses
will need to explore and capitalise upon assets they already own to
finance their acquisitions. By using existing assets they can steal
a march on their competitors”
Websdale said the lack of acquisition or sale
experience among SMEs could result in poorly structured deals and
added asset-based lending could help create the financial headroom
required to make deals work and to prevent a loss of liquidity in
the post-acquisition phase.
Venture Finance is part of ABM AMRO Commercial