Downturn could be a chance for some

Apr 1 2009 by Peter McCusker, The Journal

AN insolvency expert is advising regional businesses and entrepreneurs to start preparing now for a surge in acquisitions later in the year.

Jim James, North East regional chair of R3 and head of the insolvency and corporate recovery unit at Ward Hadaway law firm, highlighted expectations for an increase in the usual levels of deal activity from late summer onwards, and offered advice to businesses that might be on the acquisition trail in the near future.

And with an R3 survey of insolvency industry professionals finding that a large majority think more businesses will close in the current downturn than did so in the recession of the early 1990s, such preparedness could be the key both to saving companies in difficulty and the jobs of their employees.

He said: “As difficult as economic conditions are for many businesses at the moment, the downturn will also bring with it opportunities for others, and there will be plenty of excellent commercial opportunities available for those with the capacity to take advantage of them.

“Later this year, when deal activity would normally be picking up after the summer lull, could be an ideal time for acquisitions, as by then values may have fallen further and we are likely to have a better idea of where the economy is heading, so companies looking to expand will be looking to buy.

“This is positive news because it will go some way to preserving some businesses which are struggling, which will in turn save and create jobs.”

“However, there are still pitfalls to avoid around deals of this type, which are completely different from buying other businesses – things move faster, there is less due diligence and no warranties.

“Potential purchasers need to be aware of the risks and be prepared to move quickly when opportunities arise, and there are a number of important areas in which businesses can be starting to plan now for future acquisitions.”