Regional special: the north-west

If there is a success story to be told about the regions, then the north-west
is as good a place as any to start with. Manchester has some 50 accountancy
practices and more than 200,000 people working in financial and professional
services. Pro-Manchester, a business and finance forum, says that 16% of all UK
corporate finance deals are transacted out of the city. Private equity houses,
stockbrokers, accountants and lawyers are lining up to service deals from both
regional companies and enterprises from farther afield. The Big Four firms all
have offices in Manchester, as do BDO Stoy Hayward, PKF, Baker Tilly, Grant
Thornton and RSM Robson Rhodes.

The north-west has a strengthening reputation for AIM activity, for instance.
According to research from Baker Tilly, 23 companies from the north-west were
admitted to AIM in 2006, raising £254m between them, while in 2005, 24 companies
from the region listed, raising £212m. The London Stock Exchange shows 132 AIM
companies registered in the region. Only London has more.

Gary Houghton, head of capital markets north at Baker Tilly, says that the
AIM advisory community has evolved to service the north-west’s strong
entrepreneurial sector. He expects to see continued momentum. ‘The north-west is
still doing very well and continues to produce good quality businesses that
investors will be attracted to,’ he says.

While recent figures paint a healthy picture, Clive Brook, corporate finance
partner at PKF in Manchester, says that companies in the region have come round
to the idea of AIM slightly later than their southern counterparts.
Historically, he says, companies in the north have had a dynastic culture.

Often established to take care of future generations, they have tended to
remain under family control. But the growing number of flotations shows that
there is a cultural change underway. ‘Initial northern reticence may be
declining and we are seeing an increasing number coming to market,’ he says.

Also significant for the region’s reputation for AIM expertise is the number
of international companies that are finding their way to AIM via Manchester.
Brook devotes time to attracting business from the Pacific Rim, for instance,
and says he is one of a growing number of professional advisers courting
overseas business. AIM’s lighter regulatory regime makes it a less expensive
proposition than the US’s NASDAQ, for instance, where compliance costs relating
to Sarbanes-Oxley could easily outweigh the potential benefits for smaller
concerns. PKF acted as reporting accountant for West China Cement on its AIM
listing in December last year. The IPO was twice over-subscribed and the company
raised £22m on listing. Its market capitalisation less than six months later
stood at £105m.

While there is a more than adequate supply of reporting accountants for due
diligence and other preparatory work, as well as plenty of legal advisers in the
north-west, one potential sticking point for companies seeking a listing is the
availability of nominated advisers (nomads). AIM companies must have a nominated
adviser for as long as they are listed on the exchange. According to figures
from the LSE, Manchester has seven nomads – the largest group outside London
(equal second with Birmingham), but small change compared to the capital’s
90-strong nomad community.

Brook says that, while home-grown businesses would probably prefer to see a
larger nomad community, for the most part people realise that they may have to
travel to find the right one. Nomads have a regulatory responsibility to ensure
that a company’s business story makes them a suitable candidate for listing, so
there is an element of selection involved.

The region has also seen some exceptional private equity deals over the past
two years, particularly in the mid-market. Ali Sharifi says that for deals under
£100m there is ready access to capital in the north-west, but he believes London
is still the most natural choices for deals over that threshold. That’s not to
say that bigger deals are ruled out. According to the Centre for Management
Buy-Our Research (CMBOR) there were six deals valued over £100m in 2006. John
Hargreaves took his clothing retailer Matalan private in October in a £817m deal
brokered by the Manchester office of PricewaterhouseCoopers. In one of the
region’s biggest ever deals, John Caudwell sold his telecoms business to two
private equity houses for £1.5bn.

Liverpool sale

More recently Liverpool FC was sold to American tycoons George Gillett and
Tom Hicks. The £450m deal valued the club at £219m and put another £200m-plus on
the table towards building a new stadium in Stanley Park. Colin Gillespie,
corporate finance partner at PwC, spent two years advising on the deal,
including helping evaluate bids from the two Americans and one from Dubai
International Capital.

‘It was an absolutely fascinating story to be involved with,’ he says.

Gillespie says that if regional companies want to get the best deal, they
should take advantage of the expertise available locally to help them review the
wide range of options from outright sale through joint ventures to flotation.
Many entrepreneurs want to take capital out their businesses without burdening
their business with debt or resorting to an outright sale – and a good
practitioner will help them evaluate their choices.

For those that do want out, there has never been a better time to sell, says
Jonathan Boyers, corporate finance partner at KPMG in Manchester. The 12 venture
capitalists active in the region will have a good understanding of your sector
and business, but it is also possible to widen the pool, as the region has done
a great deal to attract attention from London.

Apart from that, he says, it’s all down to good governance. ‘Make sure your
business can be marketed to both trade buyers and VCs and that you have good
management, business plans and housekeeping in place,’ he says.

Nomads (nominated advisers) in Manchester include
Altium Capital
, Brewin
Dolphin securities
NM Rothschild,
WH Ireland and
Zeus Capital

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