Check out the ups and downs of the Top 200

Jul 7 2010 by Paul Mankin, The Journal

There's only a week until the Top 200 league of the biggest companies in the North East is revealed. The Journal's annual list, which is compiled by Durham Business School, is always closely watched because of the insight it gives into the changes in the North East economy. Here Paul Mankin, corporate finance partner at the list's sponsor PricewaterhouseCoopers LLP in Newcastle, discusses who may be going up and down the list this year.

IN order to maintain and improve their rankings in the Top 200, North East businesses must strive for growth. They can do this either organically or acquisitively. Regular high achievers in the Top 200 that have grown organically include Greggs and Nissan.

Acquisitive growth has proved successful for Arriva which was ranked at number one in last year’s Top 200 and placed in the top five for every one of the last eight years. The company – itself subject to an agreed takeover by Deutsche Bahn - has been consistently acquisitive over a number of years as has the software company Sage.

All companies would hope to achieve a level of organic growth but in order to grow substantially and at speed it is more common for a company to acquire existing businesses.

Recent entrants to the Top 200, Aesica, Vertu and Technology Services Group are classic examples of this acquisition led strategy and I would expect them to have moved further up the rankings this year.

For many North East companies, however, acquisitions have been put on hold due to the banking crisis and growth has been halted while they have consolidated their positions. A number of our region’s businesses such as Wellstream, Southern Cross and Stadium, have gone further and scaled back to their core activities.

It will be interesting to see if these current corporate decisions are reflected in the rankings or whether the new strategies have yet to impact on reported turnover.

A number of familiar names have been sold since the last Top 200 was published including Entec, Anson, Visage, Robson Brown and Fone Logistics. In addition a number have become victims of the current economic climate.

The deal market remains cautious and historically the local M & A market has followed national trends.

Perhaps the most significant development in terms of the coming year for the region’s Top 200 businesses is the recent announcement on Capital Gain Tax (CGT).

There will be some relief at the improvement in Entrepreneur’s Relief and that the top rate of CGT has been raised to only 28%, but what is disappointing is its immediacy.

There was some hope in the UK dealmaking community that any rises would be introduced next April.

This would have provided a window of opportunity for businesses to be prepared for sale, bringing much needed stimulus to the UK M&A market. As it is, that window has been nailed firmly shut.

This has not impacted on the new Top 200, but this time next year we will have a clearer indication of its effect.