Future fortunes

Despite the credit crunch slowing deal-making, Landsbanki’s Brent Osborne and Rachel Jones still believe there are fortunes to be made in 2008

Despite the credit crunch slowing deal-making, Landsbanki’s Brent Osborne and Rachel Jones still believe there are fortunes to be made in 2008

Despite the credit crunch slowing deal-making, Landsbanki’s Brent Osborne and Rachel Jones still believe there are fortunes to be made in 2008

There’s excitement in Brent Osborne’s voice when he talks about the year ahead. And why shouldn’t there be? The managing director of commercial finance at Icelandic bank Landsbanki had a bumper 2007, and this year promises to be just as strong.

His team generated a healthy dealflow last year, working on 42 transactions and committing nearly £1 billion. By his own admission, this was ahead of expectations.

“The turmoil in the credit markets helped – and continues to help – a lot,” he says. “Asset-based lenders always tend to do better in dynamic markets, whether they are up or down.”

His department gained momentum in many areas, but particularly in the private equity arena, which led to his team working on larger transactions than the previous year, such as providing £45 million to Sun European Capital’s IBP Group. “Advisers are realising that asset-based lending is a credible alternative to traditional forms of finance.”

This transformation of perception is one influence on activity. Another is “the roadblock on several large syndicated deals as more companies look at asset-based lending. So I expect you will see some of the smaller leverage deals becoming asset-based lending deals in 2008,” he argues.

Against the grain

Osborne’s enthusiasm is shared by Rachel Jones, the bank’s managing director of leverage finance, origination, who is currently working through a healthy pipeline.

“Our current dealflow is where I thought it would be,” she says. “It is looking very healthy indeed. We have deals in the retail sector, a couple in Spain and a handful of deals that were credit approved last year and we are waiting to see the outcome of those.

“We have some other early-stage opportunities in the pipeline where we have opened up dialogue already,” she added.

Much like her colleague, Jones believes the current turmoil in the credit markets will make for an “interesting” year. “There is a possibility that the economic markets might change, but my gut feeling is that it will take at least six months for the markets to pick up again.”

Last year Jones led the expansion of the bank’s leverage finance services outside of its Icelandic stronghold. During that time her team looked at more than 100 deals and completed 19, which included re-financings and new mandates in a variety of sectors across Europe.

This workload followed years of working with Icelandic private equity houses to expand their businesses into Europe. “In the last six months of 2006 we started to diversify and expand our client base. Last year was the first real period of that being effective, so as well as working with the Icelandic community we also worked with and competed against the European community.”

Master plan

Over the next 12 months, Osborne and Jones will be doing what all successful business operators always do to succeed – keeping the strategy simple.

For Osborne it is business as usual. “From our perspective it is to continue the education process more on a face-to-face basis. It is a case of getting in front of the decision-makers at the private equity groups so that we will get the message across about our offering in more detail.”

In terms of the likely hot sectors, Osborne says: “It is difficult to determine because in many circumstances a lot of the transactions are driven by private equity groups and their own strategies. But if you consider the companies which might be looking to re-capitalise, re-finance or re-structure, you might start to see retail coming into its own. Moreover, manufacturing and certainly anything related to auto, where there is plenty of consolidation to cut overheads, will continue to come to the surface.”

Jones reckons that as her team closed 19 deals last year by focusing on strong businesses and syndicating to local banks, she is confident that continuing to work with these types of companies will help make 2008 a better year than one might expect, given the current climate.

“Relationship banks are, in general, still open for business, but they are not going to do business with new clients,” she said. “If a business has banked with them for 15 years, and they know the local MD, they are much more willing to roll over their exposure into new facilities.”

Presently, Jones is seeing several club deals in the mid-market, adding: “It is a good way to make deals happen. There are banks out there looking to do business, but for one reason or another will not want to write 100 per cent, but will contemplate 30 to 50 per cent, which is much more palatable.”

But whatever happens, Landsbanki is keen to emphasise that, following its successful land grab, “it is here to stay”.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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