No limits for EMC

International buyers and PE firms are driving corporate M&A transactions, which is good news for corporate finance firm EMC.

Taking advantage of a difficult year for UK businesses, South East England-based management and corporate finance consultancy EMC has expanded its operations by taking on five new senior consultants and opening additional offices in Chichester and Guildford.

EMC now has 22 consultants across six offices, targeting businesses with a turnover of between £2 million and £100 million. The firm’s workload is split 60/40 between the interim management division, which provides companies with advice and support on a short or long-term basis, and corporate finance, which manages the process of selling, buying or refinancing mainly mid-market businesses.

‘We saw this as a good time to grow,’ comments Nik Askaroff, CEO and founder of EMC. ‘The unrest of the last two years has made companies think about the support they need to help either avoid a crisis or maximise a business opportunity.’

This increased demand is reflected in the firm’s financial results which last year saw revenues grow by 34 per cent and profits by 15 per cent. Encouragingly, the firm has seen a 40 per cent increase in corporate finance work this year, particularly in acquisition searches and owner-managed sales.

EMC was founded on the cusp of the recession of the early 1990s. Although the recent economic environment has been punishing, Askaroff observes that the financial collapse experienced in the UK 20 years ago was tougher than many people care to remember.

‘This has been completely different to the 1990s recession when order books died and good businesses ceased trading. This time around cash has dried up but businesses still have orders and work coming in. As a result many more have been able to manage their way through it.’

That said, Askaroff concedes that the UK isn’t out of the woods yet: ‘Business in general is now feeling the pressure that the financial sector was under not long ago. The mood in the marketplace is that we’re moving from the financial cash crisis of the last 18 months into a commercial crisis for those businesses that haven’t got cash. We think there’s still more pain to come.’

Overseas suitors

Although EMC works primarily with companies in London and the South East, it has been able to use its national and international contacts to search much further afield to identify buyers.

EMC director Desmond High says: ‘International businesses are definitely showing keen interest at the moment. They see this as a window of opportunity for them because of the currency changes as well as for strategic reasons.

‘Obviously they still need to have good commercial reasons for coming to the UK, but with people saying it’s 20 per cent cheaper to buy here than in Europe, opportunities are sure to present themselves.’

EMC was recently involved in the A$150 million (£85 million) double acquisition of freight companies Genesis Forwarding and the WT Sea Air Group by the Australian corporate Toll Group. The firm worked with East Sussex-based Genesis to find a buyer as well as assisting in the sale process.

According to High, international buyers have taken advantage of a reduced appetite from cash-strapped domestic buyers, but he does see this changing. ‘There’s no doubt that the private equity boys are back in the game,’ he says.

EMC is currently working on the multi-million pound sale of Call Hub Management Services, a call centre management company, to a private equity firm; the £5 million refinancing of a global exhibition company; and the £4 million sale of a railway sector business.

institutional interest

Askaroff and High’s co-director, Michael Pay, says that EMC has been dealing with three or four private equity firms that are seeking such acquisitions: ‘I think there’s a bit of fear that if they don’t buy now and we come out of the slump, prices will shoot back up again.’

As for lingering concerns that vendors may have about valuations, EMC takes the line that price isn’t everything. Crawley-based director Terry Rainback says: ‘Our usual advice to vendors is not to be too rigid on price but to ask themselves: “What do I need in order to achieve what I want to do?” So if they want to retire, does the offer provide them with enough money to do so comfortably?’

While realistic about the potential consequences of the massive cuts being introduced by the government and the growing fear of inflation, Askaroff is confident the firm is well positioned to win new business: ‘In all likelihood we will see fewer deals at the top end of the market, but there will almost certainly be an increase in distressed sales at the mid to lower end.

‘We’re ideally placed to sweep up a reasonable share of that business which is why we opened the new offices and took on the additional people.’

EMC: VITAL STATISTICS

Founder and chief executive: Nik Askaroff
Established: 1989
Consultants: 22
Head office: Eastbourne
Website: www.emcltd.co.uk

See also: Interview with James Finnegan, head of corporate finance and partner at Bishop Fleming

Nick Britton

Nick Britton

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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