BusinessCorporate FinancePrice of companies falling

Price of companies falling

The mergers and acquisitions market for deals below £100m is recovering even though that deals above that mark seem to have completely disappeared, according to one of the top corporate finance practitioners in the country.

Mark Paccitti, head of the private equity group at Deloitte & Touche, told a meeting of the ICAEW’s corporate finance faculty that the lower end of the market was receiving a boost from venture capital. He said that corporates were still not buying, mostly because they are under pressure to divest themselves of the non-core parts of their businesses.

But as a result, Paccitti said the price of companies had been falling.

Prices that had been turned down last year could well now be acceptable.

But the top end of the market has disappeared. ‘All big contracts of more than £100m have gone,’ said Paccitti.

Faculty members were told that some deals were still going through. Earlier this month Rutland Fund Management announced it had exchanged contracts for the acquisition of the musical instrument manufacturing division of Boosey & Hawkes.They also heard how the EasyJet takeover of rival budget airline Go was structured to avoid risk to the two companies, if efforts to come together turned sour.

3i partner Tom Sweet-Escott, told the meeting that Go had not wanted to give away any sensitive information. The decision was therefore made for Go to launch a flotation and allow EasyJet to bid.

‘We said we’d go for an IPO, but that they (EasyJet) could bid for us,’ said Sweet-Escott who added that the structure sidestepped the need for intrusive due diligence.

At the meeting, Howard Leigh, chairman of the corporate finance faculty, said the body would investigate training possibilities after members called for a recognised qualification to train accountants, lawyers and bankers in corporate finance.

The institute will also look into US rules that do not all allow corporate financiers to operate across the Atlantic unless they have a broker-dealer licence. The measure has the effect of excluding small corporate financiers from US work.

The institute is looking to set up a partnership with a broker-dealer in the US to give smaller firms a legitimate way to deal in the US.

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