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Funding trends - Breakfast seminar 14 March 2012

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Funding trends - Breakfast seminar 14 March 2012

  1. 1. Professional Briefing – “Wot, no bank funding!” A review of funding (and transaction) trends and implications for the year ahead 14 March 2012
  2. 2. Administration Admin Timetable Presenters…
  3. 3. Presentations covering… • Lessons for debt, equity and grant raising from 2011 • Expectations and market developments for 2012 • Implications for SMEs – Legal – How to succeed
  4. 4. Lessons (and trends) in debt funding Mark Greaves, Corporate Finance Partner, Francis Clark LLP Mark.Greaves@francisclark.co.uk
  5. 5. Key themes from WMN Deals Review - 2011 • Small recovery in reported Deals Number of deals per month (3 month rolling average) 50 800 CorpFin deal data (right 45 hand scale) 700 40 35 600 30 WMN Deals Review (left hand scale) 25 500 20 400 15 10 300 5 0 200 Oct-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11
  6. 6. Key themes from WMN Deals Review - 2011 • Increase wholly attributed to Sales and Acquisitions • Decrease in MBOs, equity finance etc • Significant decline in equity deals (25 v 36) • Increase in JV (renewable projects) • Large number of aborted deals
  7. 7. Banks… • Increase in bank funded deals • Still well below deal volumes in period 2006 to 2008 • Very few MBOs/ MBIs funded purely from debt Deals funded by main clearing banks 2011 2010 2009 2008 2007 2006 Acquisitions 43 35 32 61 60 51 MBO/ MBI 6 8 10 12 15 20 JV/Merger 4 2 - - 1 1 Raise equity 3 8 1 1 3 2 Other 3 4 2 4 2 11 59 57 45 78 81 85
  8. 8. Banks: National perspective • “Banks miss Merlin target for SME loans” – Net lending to businesses by Britain’s five main banks fell £9.6bn last year – Over £1bn shortfall to small businesses (target = £76bn; actual = £74.9bn) – “regulatory changes and higher wholesale costs had constrained the ability to banks to lend” (CBI) – Demand v Supply
  9. 9. Debt finance – Government help? • “Negotiated deals [on lending levels] cannot be a permanent solution in a market economy” – George Osborne • Government will seek to lower cost – National Loan Guarantee Scheme – £20bn – to cut interest rates by 1% • Government to increase competition? – Business Finance Partnership (£1bn +)
  10. 10. Interest rates
  11. 11. Cashflow funding • Match concept • Profit stream historics (5 to 7 years) • EBITDA altered focus (depc’n v capex) • PGs (min ++) • Differential between main clearing banks • Sensitivities • Costs • Vendor subordination
  12. 12. New players • New Banks and mezzanine funders: – Co-op – Santander – Octopus – Project Rainbow – Handelsbanken – Centric • Second tier HP
  13. 13. Debt: Practical points • Banks no longer funding “equity propositions” • Credit committee versus front line managers • Approval process – try, try and try again • ABL versus others (esp. o/d) • Covenants and enforceability • Own versus new clients • Specific bank appetite – renewables, property, etc • Look at proposal from their side!
  14. 14. Grants – ‘last days of the free money?’ David Bullen, Corporate Finance Senior Associate, Francis Clark LLP David.Bullen@francisclark.co.uk
  15. 15. Background and themes • Background – UK Government has no funds and/or appetite to stimulate growth through new money.. – Convergence funding for Cornwall & Isles of Scilly ends running from 2007 to 2013 • Themes? – Announcements (followed by delays) – Reassignment/ Recycling of funds – ‘End dates’ – Competition for Funds e.g., PWGF 3rd round
  16. 16. “New Funds” • Regional Growth Fund and Assisted Asset Purchase Scheme – Grants of up to £500k – Match with bank loans – Investment in capital assets and job creation – RBS/ Nat West and HSBC
  17. 17. “New Funds” • Business Investment in Growth (“BIG”) Voucher Scheme – Grants of up to £50k – Match funding – “step change” expenditure – High growth businesses – Convergence
  18. 18. Old favourites… • Grant for Business Investment – Up to 50% of capital costs or ‘capitalised salaries’ – Innovative knowledge based projects – GVA – Creating skilled employment – Convergence
  19. 19. A bit like GBI.. • Cornwall and Isles of Scilly LEP application to RGF – “GBI style grants for premises and equipment” – Superfast Broadband opportunities – Infrastructure projects in marine, mineral, renewable energy and aerospace industries
  20. 20. A bit like RDPE… • Rural Economy Grant (REG) – £60m scheme (new money?) – Grants of b/w £25k and c £1m – ‘game changing’ performance – Farm, forestry, tourism, agri-food businesses – Convergence??
  21. 21. Grant raising • Business case to the fore • Match grant with business model/ need • Dialogue • Three questions – Eligibility – Quantum – Issues • Patience/ timetable
  22. 22. A review of funding trends and implications for the year ahead GAVIN POOLE, partner, corporate team 14th March 2012
  23. 23. CORPORATE EXPERTISE • Service to national clients • Disposals, acquisitions, joint ventures, buyouts, debt restructuring, finance raising transactions • 71 corporate transactions in 2011 and a range of other advisory matters • 15 senior transactional lawyers • Partner led service Corporate/M&A: South West Devon & Cornwall
  24. 24. Legal observations • Pressures • Finance • Resource (inc time) • Sector activity • Charities • Highly regulated (eg care homes) • Big Society • Management buyouts • Sharp decline in larger deals • Reduction in deal values • More exits by private equity • Increase in use of debt finance • Foreign investment • Cash • Reserves • Shortage
  25. 25. Legal implications • Continued consolidation • For larger businesses, pressures to keep up profits drive restructurings • Lower deal values point to a number of potential factors including: • Drop in business values? • Less funding available? • Increase in exits point to a number of potential factors including: • Cashing in? • Lack of confidence? • Cash availability • New entrants/ways of raising money
  26. 26. A new team event: Finance • Structures in a different landscape • Reward • Reduced upfront payments • Loan payments • Deferred consideration • Consideration in non-cash elements • Put and call options • Security • Difficult to predict mix of debt and equity • Grant funding • Prime/sub-prime competition • Risk • Co-investment (risk sharing) • Performance based deferred consideration • Joint ventures • Options (planned/staged transfers) • and many more…
  27. 27. Old and new sources of finance • Old • Debt • Equity • Fools, friends and family • The London Stock Exchange • Main exchange • 2010: 89 new admissions. £10bn raised • 2011: 76 new admissions. £12.9bn raised • AIM • 2010: 43 new admissions. £6bn raised • 2011: 45 new admissions. £3.8bn raised • New • Joe Public (phase II) • Crowd • Peer-to-peer • Other structures/other uses • Co-ventures with Big Society stakeholders • New entrants • Banks, grant funding
  28. 28. Next 9 months • Launch of charitable incorporated organisations (“early” 2012) • Guidance on corporate environmental impact (during 2012) • Changes in qualifying conditions for EIS/VCT schemes (April 2012) • Olympic Games • Changes in registration of security (October 2012) • Procedural • Clarification
  29. 29. Crystal ball • World economy • Convergence funding coming to a close • Rise in complexity of structures? • Rise in activity expected • Confidence…due diligence
  30. 30. THANK YOU Gavin Poole, partner Truro office 01872 243344, gavin.poole@footanstey.com
  31. 31. Finance Raising in 2012 … a focus on equity? Mark Greaves, Corporate Finance Partner, Francis Clark Mark.Greaves@francisclark.co.uk
  32. 32. Finance Raising • Debt • Grant • Equity – “Although the number of equity deals decreased… Downing, Eden, Octopus and Piper active… expect the number of equity backed deals to increase substantially into 2012.” – WMN Deals Review
  33. 33. Friends, family and … Business Angels Venture Capital Private Equity
  34. 34. Business Angels • Crowdcube/Kickstarter • SWAIN/Beer and partners • South West Cleantech Co-Investment Fund • Angel Co-Fund • EIS/SEIS
  35. 35. The Angel CoFund • Initial Equity Investments • £100k to £1m • Alongside syndicates of Business Angels • Upper limit of 49% of any investment round • No direct applications by SME
  36. 36. Seed Enterprise Investment Scheme • Investor and invest up to £100k • Staff < 26, Assets < £200,001 • New Business • Tax reducer equal to 50% of investment • Proceeds of any gain reinvested into a SEIS exempt from CGT (fiscal year 2012/13) • Details to follow…
  37. 37. Equity providers • Relevant funds : – Altitude (Bath 2012) – Westbridge (North Devon 2012) – Chrysalis – Broadlake – Eden – Octopus – Matrix • Business Growth Fund • Improve debt proposition
  38. 38. Business Growth Fund • Commercial Fund • Bank financed • Investments of b/w £2m and £10m • Minority stakes • Relaxed on sectors – but no property or financial services
  39. 39. Doing the equity deal • Know your market – Business Angels – Venture Capital – Private Equity • Understand ‘Risk v Reward’ • Know ‘enhancements’ – EIS etc • Understand valuation and Investor Return • Sector and Geographical specialisms • Do not forget about Debt and Grant…
  40. 40. Equity deals • Piper/Celtic • BGF proposal • Altitude/technology company
  41. 41. Conclusion • There are funds? • Missing ingredients? – Confidence – ‘The right propositions’
  42. 42. Conclusion • Strategy for 2012 – Creative solutions – Know the market place – Look at the proposition from the other side – Understand key requirements of • Credit committees • Investors etc • Vendors
  43. 43. Future events/ presentations Next professional briefing • Manufacturing UK – 26 April, Lowin House Finance in Cornwall 2012 – 15 May, Lighthouse Cinema, Newquay Now in its fifth year; with a slightly revised format. VIP speaker (TBC). More information to follow.
  44. 44. Disclaimer & Copyright (c) copyright Francis Clark LLP, 2010 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence. To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP. These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales. These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request. Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

Notes de l'éditeur

  • BUT balancing:BASEL III/capital ratiosFurther bad debtsHigher/one off taxesIncrease lending (ignore demand)Impossible? Nationalisation (UBS)
  • And margin?
  • Certainly for SMEs &lt;£25m t/o

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