After what has admittedly been a very tough time for the financial sector and with banks’ lending practices coming under more scrutiny than ever, it is easy to see why many might be sceptical as to whether the situation is starting to improve. However, there has been an encouraging increase in deal opportunities in recent months, with accountancy firms now demonstrating they are once again in a position to consider expansion, and are able to capitalise on opportunities emerging in the market.
A recession can be a catalyst for positive change, enabling businesses and industries to re-evaluate their situation, streamline their business model and seize on new opportunities. With the necessary support from banks, firms will be in a better position to take advantage of the opportunities that arise as the recovery eventually gains momentum.
Recessions do not last forever and, even in the midst of a downturn, banks have demonstrated that they are open to lend to those accountancy firms that are able to demonstrate their stability and future planning. We respond positively to firms that have a strong management structure in place and have the ability to illustrate a robust and detailed future business plan, as well as demonstrating strong financial performance against the latest budgets and cashflow projections. A lot of restructuring activity has taken place and the most successful firms have improved financial management disciplines, which is a welcome move.
Many banks have made a commitment to the accountancy profession in the UK and funding is there for the right projects. By way of example, earlier this year we worked closely with RSM Tenon, a leading provider of accounting and business advice to entrepreneurs. We had a clear understanding of its strategy and vision and we were able to provide a £35m funding package to assist in the acquisition of RSM Bentley Jennison.
We also supported RSM Tenon recently when it acquired part of the Vantis business. By drawing on the excellent working relationship we as a bank have with RSM Tenon, we were able to work in partnership with the firm’s senior management team and to provide it with a further £10m of bank facilities to support the Vantis transaction.
Up to the Challenge
Many firms are currently focused on steering a course through the recession and its aftermath, however, it is important to remember not to lose sight of future planning. Firms need to ensure they consider future trading, how to attract and retain clients and whether capital expenditure is required in the short term in order to facilitate long-term growth. If part of the longer-term strategy involves capital expenditure, potential funding from banks for expansion or refurbishment projects may be necessary.
In order to ensure that your firm stands the best chance of securing this funding, it is essential to prepare a carefully thought out business plan focusing on both day-to-day performance and cash management. Banks will expect to see a thorough assessment of the sector trends, a good understanding of the marketplace and, where possible, a clear demonstration of knowledge of the actions of peer group competitors. It is imperative that management teams are able to articulate that they have the necessary all-round blend of experience, expertise and skills to deliver a plan which will be stress tested. This will then need to be executed in an ever-changing economic and commercial environment.
From working closely with our customers, we understand the difficult times the sector has experienced recently. However, from regular discussions with key players in the sector, prospects are picking up again and businesses are coming to us looking for advice on how they can leverage the opportunities that are emerging as a result. This is very good news for the sector as a whole, and we are working in partnership with our customers to ensure they are in the best possible position to make the most of these opportunities as they arise.
Encouragingly there are still deals being done, and often these are based on having a sound management structure in place. My advice to senior management at firms is to ensure you talk to your bank and make them aware of your strategy and thinking as it evolves as early as possible. This will strengthen the relationship you have with your bank and, in turn, allow them to gain a solid understanding of your current objectives and plans for growth.
In the current climate, it is essential to have some sense of a ‘Plan B’, even if this may be subject to change. One lesson to be learnt from the events of the last 18-24 months is that best-in-class management teams are agile and capable of adapting to changing circumstances quickly. This is where we can provide input and guidance, based on our knowledge and experience, to help senior management plan and implement realistic forecasts. That is why I believe that firms that emerge the strongest from the recession will be those that have the closest relationship with their bank.
Steady as you grow
There are many accountancy firms that are evaluating their options carefully and do not want to jump in to new opportunities until they are fully confident of the outcome – a ‘steady as you go’ approach until things really start to pick up.
However, while times remain challenging, managing your business to ensure both survival and growth in a safe way is achievable. As growth opportunities for businesses begin to emerge, it is important to find a trusted banking partner to provide your business with robust and strategic financial advice and support. I also feel that as the dust from the recession settles, we will begin to see more consolidation and further selective M&A activity across the accountancy sector which will present opportunities.
Today’s management teams have become more professional since the dark days of the last recession and professional practices, including accountants, are able to take a much more balanced view of the economy, which, in turn, enables us to provide ongoing and effective support in both difficult and good times.
The accountancy sector is a vibrant one with a diverse range of businesses and skills and we’re committed to helping the profession realise its ambitions – whether that be through supporting a new firm, or continuing to strengthen relationships with existing customers.
Martin Prentice is relationship director, professional practices at Lloyds TSB Corporate Markets
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