Bank lending activity continues to generate considerable debate, but a recent upturn in Mergers & Acquisitions (M&A) activity in the UK offers a ray of hope for commercial finance brokers who are hoping to see their clients take a more positive attitude to growing their business.
There’s an ongoing debate about whether banks are lending or not. The banks say they are, business owners generally say they are not. Who is right? Well, in some ways it doesn’t matter what the banks are doing.
The reality of the situation is that there are many other options available to businesses who want to raise finance today than there were a few years ago. Asset finance, invoice finance, short term lending, and crowdfunding on an equity and debt basis are all viable options.
The appetite to invest
Perhaps the key question from the perspective of a commercial finance broker is whether a client has the appetite to invest in building their business. Recent years have seen business owners adopt a more cautious approach to invest in growing their businesses, whether this would be funded from their built up reserves or from obtaining a loan or equity finance.
Increase in M&A activity
Recent research from Cass Business School and Towers Watson showed that UK companies were involved in more mergers and acquisition activity last year than any other country in Europe. This could be great news for commercial finance brokers in 2014.
In Europe 106 deals over $100m (£610m) were completed in 2013. 30 of these deals were done by UK companies, representing a strong performance when you consider that Gerrmany did 6 deals, and France recorded 7. On a global basis, mergers and acquisitions reached $2.8tr (£1.7tr) last year, the highest total since 2008, according to Dealogic.
Why do M&A deals create positive sentiments?
When mergers and acquisitions go well, the new business entity that gets created carries more value than the two (or more) that it was formed from would previously have generated. In this situation, the new business is more competitive and forces its competitors to look at stepping up their game. This invariably leads to a desire to invest/borrow, which is where the market gets kickstarted.
All the signs are very good in the UK economy at the moment. GDP is growing, interest rates are low, and business confidence is on the increase. The scene is set for a busy time for commercial finance brokers and other funding advisers.
This article originally appeared on the rebuildingsociety.com website in February 2014 – click here to view it. Whitecap Consulting has worked with rebuildingsociety.com since 2012, and Julian Wells consults with the business as Marketing Director with a focus on the introducer channel.