Public-to-private (P2P) deals are set to increase this year as acquirers take advantage of lower valuations, according to Peter Brooks, MD of Lloyds TSB Development Capital (LDC).
Brooks tells GrowthBusiness, ‘You are probably going to see more P2Ps because there is now a balance between what chief executives think their companies are worth and the share price.’
‘Last year, if we had done P2Ps we would have lost money.’
He adds that London’s Alternative Investment Market (AIM), where ‘prices have fallen materially’, may offer particularly good P2P opportunities.
‘Among institutions there has been a flight to quality and a flight to liquidity, which has tended to mean bigger companies. If the driver [for investors] is liquidity not value, that will depress the price of a stock.’
Brooks adds that LDC has £250 million to invest this year which is ‘ringfenced’ from the wider Lloyds banking group, in which the UK Government now has a majority stake.
‘In the context of the group as a whole, we’re a pinprick,’ says Brooks, adding, ‘We make the highest risk-weighted return on assets of any part of the bank.’
On investment prospects for this year, Brooks states, ‘I think, at some point in the next six to nine months, we’re going to enter a period of strong investment potential. There’s a lot of turmoil at the moment, but there are also positives: interest rates are down, commodity prices are down, and the government is spending money.
‘It’s just a question of when that starts flowing into the economy.’