Pictured above: Malcolm Cook
More West Midlands companies - many acquired on the cheap - are
going to follow Cadbury into the hands of foreigners, an expert has
warned.
Malcolm Cook, a partner at the Birmingham office of accountants
and business advisers PKF, described it as "a good time to be
buying in the UK".
His comments are sure to spark further concern for the region's
manufacturing base while renewing job fears.
US food giant Kraft says its £11.7 billion deal to acquire
Cadbury would create "global confectionery leader". But
pundits believe job cuts are now likely at Cadbury's UK operations
perhaps including its historic Bournville factory.
Mr Cook's comments came in PKF's Deal Drivers report produced in
association with researchers mergermarket.
He predicted: "There will be a number of attractive businesses
in the Midlands that are going to be coming up for sale in the
course of 2010. It is still very early days but I would expect
there to be interesting firms on the market which could attract the
attention of foreign buyers.
"These sales are not necessarily the result of distressed
factors but by drivers such as advantageous currency exchanges for
foreign buyers. The current foreign exchange environment has made a
UK-based acquisition highly advantageous. It's a good time to be
buying in the UK."
Sectors to look out for in the Midlands included distribution,
logistics and healthcare, as well as education and energy.
Mr Cook said the region's more dominant manufacturing,
engineering, construction and auto-related industries had been hit
hard.
2009 had been an annus horribilis but activity was beginning to
pick up.
"Lack of clarity with regards to the overall economic
environment and how it would develop; trading performance; the way
banks would go forward; and, more recently, the political
environment, meant businesses have been internally focused and so
shied away from M&A activity," Mr Cook said.
Businesses had experienced "sufficient support" from banks with
a surprising lack of distressed-driven deals. However, that support
only extended as far as not calling in loans and holding off on
covenant breaches. "Financing was still difficult to obtain for
regional businesses," he added.
Nevertheless, Mr Cook said he was "fundamentally
optimistic".
He continued: "That optimism is driven by a number of factors,
but largely because we are seeing banks opening up and lending
taking place again.
"Going forward, the sweet spot in terms of deal values in the
Midlands will continue to be in the £25 million range."
The analysis was backed by the wider UK report.
It stated: "Banks could become more aggressive with regards to
the loans that they have provided as the economy improves and the
value of underlying security follows.
This will likely increase the financial pressure on businesses
and could hasten a wave of distressed situations.
"Nevertheless, aggregated valuations in the third and fourth
quarter of the past year give cause for confidence and while no one
is quite ready to say 'all is well again', the consensus is that
while the effects of the crisis will continue to be felt,
businesses that are fundamentally sound and have survived thus far
will make it through the downturn.
"Firms are coming out of their retreat and eager to take
advantage of the opportunities that are available to them. While
there are still challenges facing UK-based businesses, the market
is clearly on the road to recovery."