From HGV drivers to McDonald’s milkshakes, the shortages attributed to the coronavirus pandemic and Brexit have been the cause of many laments – but a recent increase in M&A deals is a more positive trend.
The alternative lender BOOST&Co took second place in the list of top 20 debt providers in Experian’s latest M&A report, and Ryan Sorby, the lender’s head of the north and Scotland, says that for any management teams considering an acquisition, now may well be the right time.
Sorby is seeing traditional lifestyle business owners “becoming increasingly concerned about what might happen to the company they’ve built up”. The uncertainty sparked by Covid-19 and Brexit, and the swift pace of digital transformation, have created “nervousness as to how they keep up with change, never mind maintain their strong market position; this has accelerated their decisions to sell”.
The result, he says, is “a great opportunity for innovative, dynamic management teams that aim to scale with a growth strategy that includes acquisitions. The high volume of business owners looking to exit is fuelling M&A across all sectors, especially in technology, media and communications [TMT].”
Why BOOST&Co is best for acquisition finance
BOOST&Co funds acquisitions in numerous sectors, but this strategy can be particularly effective for tech companies targeting accelerated growth: their often simple supply chains and low cost of delivery and infrastructure make them easier to integrate than manufacturing, logistics or retail firms. BOOST&Co also supports longer-term strategies involving acquisitions that are not yet known – so, why is the lender your best option for acquisition finance?
• We can fund multiple acquisitions
Lenders often restrict businesses to acquiring one company at a time, but BOOST&Co can fund multiple acquisitions. “If you have three acquisitions lined up, most banks and traditional lenders prefer to see sufficient time between them, to ensure that they are integrated successfully. Our understanding of TMT enables us to support an accelerated strategy,” Sorby says.
“We’ve supported strong management teams that have successfully used this strategy, such as the London-based communications firm TelcoSwitch, which recently made its third acquisition in seven months. We also funded two acquisitions for the Manchester-based graduate recruitment specialist CareerPass Network, which could have been completed on the same day, if required. This track record gives us the confidence to lend.”
• We will lend against your combined financials
Traditional lenders look at how much debt your existing business can service, but BOOST&Co will lend based on the combined strength of your company and the firm you want to buy. “Banks have historically excluded the benefit, profit and cash generation of the target company, because its delivery is less certain, so they will assess your debt capacity and repayment capability based on current operations,” Sorby says. “We will consider the combined businesses and potentially the combined forecasts, too.”
• We will take synergies into account
Combining two businesses drives synergies that can reduce costs – for example, reducing headcount where a role is duplicated. “These synergies carry a lower risk of delivery, so we’re happy to see them in your financial model when we’re assessing how much we can lend,” Sorby says.
• We value strong management teams
BOOST&Co trusts you to run your business, so high-performing management teams may not need to be supplemented after an acquisition. The lender is also comfortable with acquisitions in which the target company is larger than your firm. “Some lenders would refuse funding to buy a bigger business, but we’re not put off by the size of the transaction,” Sorby says. “We just need to be confident that your team can run the combined business – something we look for in all of our deals.”
• We can fund organic growth alongside acquisitions
Loans do not have to be spent solely on acquisitions: an investment from BOOST&Co can be used to fund both organic growth and M&A. “If your strategy is split between organic growth for your existing business and an acquisition, we’re happy to consider both,” Sorby says.
The message, then, is loud and clear. With flexible funding available from BOOST&Co, plus a glut of business owners seeking to sell, M&A – which has already helped to promote economic recovery in the UK – offers a golden opportunity for companies aiming to accelerate their growth.