Merger and acquisition activity is increasing among Channel Island companies as the economy continues to grow.
KPMG in the Channel Islands has told senior figures in the finance sector at seminars in Guernsey and Jersey that the high-profile acquisition of Close Brothers Offshore Group by Kleinwort Benson in early March was a sign of the times.
They have seen a significant uplift in merger and acquisition activity in the past 12 months, following a small increase in business in the previous year.
There has also been a trend to reduce the amount of debt used to finance transactions. Many deals are going through with a relatively low cash payments up front, followed by performance-driven deferred payments.
‘We are seeing more activity in the islands as the economy continues to come out of recession,’ said Robert Kirkby, Advisory Director at KPMG in the Channel Islands.
‘There was still some uncertainty last year, with the Alternative Investment Funds Directive and the future of Zero-10, but now business is picking up, and some of the significant deals we are seeing act as a barometer for businesses confidence in this area.
‘The Channel Islands remain an attractive market for mergers and acquisitions, both for deals within the island and for companies entering the islands, either from the UK or other offshore jurisdictions.
‘Our finance sector businesses are well-regulated, operating in a stable regime, with good cash flows, steady clients and a well-educated workforce.’
Mark Ashburn, Senior Manager in Advisory Services at KPMG in the Channel Islands, said that research carried out by KPMG had revealed that nearly half of companies who had gone through a sales process in recent years felt that they had failed to maximise the company’s value at the time of sale. Even a quarter of private equity firms had not managed to realise full sales value.
Mr Ashburn said that businesses had to be prepared to accept that deals would take time to complete, commonly between six months and a year and sometimes longer. In the current climate too, sellers would need to be realistic around their expectations over the sale price.
‘Preparation before the transaction process starts is key for any sale or purchase to successfully maximise value and minimise risk,’ he added.
The seminar also considered the early stages of buying or selling a business, including identifying potential purchase targets and interested purchasers, and some of the pertinent tax issues around mergers and acquisitions.