Fears that Brexit will lead to a fall in company acquisitions and sales have so far failed to materialise in the South and West. According to South Coast chartered accountants and business advisers PKF Francis Clark, transactions continue to be completed despite the uncertainty caused by the shock result of the European Union referendum.
Andrew Killick, Head of Corporate Finance at PKF Francis Clark, said: “We have been as busy as ever since the referendum and even completed a sale on the morning of the result – just after the votes had been counted! Since then we have advised on Southampton-based Altitude Partners’ equity investment in Moortec, leading providers of in-chip monitoring based in Plymouth; the sale of Devon-based Jubb Consulting Engineers to its Management Buyout (MBO) team; and the sale of Gillett’s (Callington) Limited – the family-owned business that operates 63 Spar stores throughout Cornwall, Devon, Dorset, Somerset and Wiltshire, to an overseas purchaser.”
Mr Killick continued: “Although certain sectors such as property may have been affected, and some large private equity deals are being put on hold, we still have buyers interested in acquiring quality South and West based businesses and funders keen to support MBOs and the growth plans of local entrepreneurs.
“Looking ahead, the trading performance for many businesses in the region will continue to be largely unaffected in the short term, as existing orders and contracts continue to be fulfilled. It will only be after any actual decline is experienced, and it is reported in the subsequent financial accounts, that the impact can be fully assessed – that will be far ahead and for some businesses not until well into 2018. Consequently, businesses will have to carefully assess the bad debt and credit risk of their trading partners and remember the old adage – turnover is vanity, profit is sanity, but cash is king.
“One potential area of immediate concern is that property valuers may feel that the lack of demand for property transactions post the referendum means that valuations should be reduced. Whilst on the face of it this should only affect those actually looking to buy or sell, the reality is that many businesses use their property assets to support their broader funding requirements. Consequently there is a risk that lower valuations will reduce the debt quantum that banks and other funders are willing to lend, and at the extreme it could mean that lending covenants are breached – even if there is no change in the trading performance,” Mr Killick added.
