Now is the time to secure the right funding package to grow your business, as deal activity starts to pick up.
2010 is shaping up to be a busy year, which is good news for Phil Woodward, the managing director of Leumi ABL. Chris McIntyre reports.
The market for dealmakers has stabilised as the year has gone on. ‘We’ve had a steady, though not prolific, stream of deals,’ says Leumi ABL’s managing director, Phil Woodward. ‘On average, we’ve completed a couple of transactions per quarter, plus a higher number as refinancings have been completed, which isn’t too bad given that the economy has generally been bereft of M&A activity over the past few months.’
One such transaction was completed in May when Leumi ABL backed the management buy-out of ATC Drivetrain. The Lincolnshire-based company is a supplier of remanufactured diesel and petrol engines to customers including Ford and Jaguar Land Rover, and has an annual turnover of around £10 million. The ABL package helped fund the MBO from its US parent company, ATC Technology, as well as providing ongoing working capital.
Ready for action
‘It’s fair to say the level of deal activity has certainly started to increase, and our pipeline would suggest that running through the next few months we’re going to be very busy,’ says Woodward, who recently picked up the award for Alternative Finance Provider of the Year at the M&A Awards.
In total, Leumi ABL, which is a subsidiary of Bank Leumi (UK) Plc, completed 58 deals in 2009. The size of transactions ranged from £500,000 to £25 million and included the full range of asset-based lending, so not only invoice finance but inventory and plant and machinery finance too. ‘These types of facilities do lend themselves very well to MBOs and MBIs,’ says Woodward. ‘Despite the turbulent market conditions that prevailed last year, our appetite for deals remained the same, our terms for underwriting credit did not alter and we continued to complete good deals. We have the benefit of a strong and supportive parent bank behind us, so we were able to continue delivering upon the message that we have been putting out to the market, which is that we’re open for business and we’re keen to look at both refinancing opportunities and M&A activity.’
During 2009 the decision was made to acquire Charterhouse Commercial Finance, which has been rebranded as Leumi Invoice Finance. ‘It was a strategic decision that gives us the springboard to be able to roll out funding to the smaller business,’ reflects Woodward. ‘Historically, we only dealt with businesses with funding requirements of between £1 million and £25 million, which meant that a larger proportion of the smaller businesses were missing out on the type of services and facilities that we can provide.’
Looking ahead, Woodward says that CEOs now accept that they have to grow their businesses and can’t keep hunkering down. ‘People have realised that they have to get on with their lives; they can’t just wait for a full economic recovery. It’s going to take us a little bit longer to get out of the mire that we’re in than people had initially hoped.’
A hike in interest rates and the prospect of inflation continue to be serious causes for concern, although sensible planning can evidently help a management team get through most financial difficulties.
‘It’s a very fragile economy, which reinforces the importance at the moment of having the right funding package in place,’ says Woodward. ‘It’s vital to have headroom within your business plan; you’ve got to de-risk your business as much as possible.’