In the aftermath of the credit crunch, refinancings were the order of the day, but now there’s increased appetite for aggressive dealmaking, according to Leumi ABL.

In the aftermath of the credit crunch, refinancings were the order of the day, but now there’s increased appetite for aggressive dealmaking, according to Leumi ABL.

As levels of dealmaking declined during the worst part of the crash, financiers and advisers understandably shifted their emphasis towards refinancings. However, Phil Woodward, managing director of Leumi ABL, believes we are now seeing a return to the levels of dealmaking seen in 2007.

‘Certainly, as we look at the opportunities in our pipeline, it’s got to 50-50 [between refinancings and M&A], which is some shift from last year. During the crash I would say it went to 80 per cent refinance and 20 per cent dealmaking,’ Woodward reflects.

Despite the bullish outlook, he concedes that expected interest rate rises could put a lot of pressure back on businesses that have narrowly managed to survive the downturn. That could lead to some interesting refinancing opportunities for the asset-based lending sector, especially given the continuing risk aversion of the banks.

When ink and varnish provider Stehlin Hostag Ink reported a loss for 2009, its clearing bank felt unable to support the company any more. Leumi ABL stepped in with a refinancing package that included an invoice discounting facility worth £3.5 million, which now provides the Nottingham-based business with security of funding together with a degree of flexibility.

Industry-wide statistics suggest that the number of clients using invoice discounting services fell during 2010, but Woodward doesn’t see that as evidence of a decline in popularity. Instead, he suggests that asset-based finance at the larger end of the spectrum, as opposed to pure factoring and invoice finance, is moving to the fore.

‘Factoring and smaller invoice discounting facilities would have been more prevalent among smaller businesses, but I think they have taken a real bashing in the recession,’ he argues. ‘Smaller lifestyle businesses may have closed their doors, especially if they did not have much meat on the bone in the first place and then suffered a dip in turnover.’

Woodward reports that many existing clients are seeing turnover increasing, and as a consequence are borrowing more.

In February the firm helped automotive and industrial component manufacturer Philidas realise its growth ambitions by providing a total funding package of £1.6 million. The advance, consisting of £1.3 million in invoice discounting and £300,000 in stock finance has enabled Philidas to recruit another nine employees.
 
‘We are seeing the corporate finance boutiques and the venture capitalists bringing deals to us that need multi-asset facilities, as they are latching on to the fact that those assets on the balance sheet are a valuable source of finance,’ Woodward says.

Looking ahead to the rest of the year, Leumi expects to build on an unexpected upsurge in activity at the end of 2010 and take advantage of a healthy pipeline of deals.

Woodward explains, ‘In the last three to four weeks, deal impetus has really gathered a head of steam, as it has taken some time for these larger deals to come through.’

Woodward is optimistic about returning to pre-crash levels and summarises, ‘It’s going to be an interesting six to 12 months ahead. There will be hard work, but there will also be opportunities.’

Phil Woodward
Managing Director
Leumi ABL
Tel: 01273 716 200
Mob: 07900 802 774
Fax: 01273 716 210
Email: pwoodward@leumiabl.co.uk
Web: www.leumiabl.co.uk