Builders keen to shop for land and brand

Sep 14 2006 North East Vision

Rod Wilkinson, KPMG's head of corporate finance in the North-East and Yorkshire looks at the merger and acquisition activity in the UK housebuilding market

KPMG's corporate finance practice is extremely active in the housebuilding sector. We have seen the appetite from potential acquirers increase in recent months, from an already buoyant base.

After three to four years of strong house price inflation which drove profit growth in the sector, interest rate rises during 2004 resulted in a softer market in 2005.

In the context of slower price inflation and in order to continue to drive profit growth, housebuilders with sufficient critical mass are looking to increase volumes by both organic and acquisitive means.

In respect of M&A our current experience is that there are a broad range of active acquirers of housebuilding businesses, including major regional housebuilders looking to expand their geographic coverage by the acquisition of brands, operations and land bank; overseas housebuilders looking for beachhead acquisitions in the UK or to expand their UK geographic coverage; and national players seeking land bank to augment their operations.

In the North-East, KPMG Corporate Finance recently acted for the shareholders of Bowey Homes Holdings Ltd on its £31m disposal to McInerney Holdings plc.

Bowey Homes' strong and longstanding position in the regional market meant it was an attractive proposition and a competitively managed process ensured a lot of interest in the business.

KPMG Corporate Finance's role on the transaction was to work with the shareholders' legal advisers, Robert Muckle, to manage the competitive process.

We have significant experience in the sector and an excellent understanding of the approach adopted by potential purchasers to acquisitions. That experience was invaluable in this case.

It has been a pleasure to work for a strong local company alongside Robert Muckle. The advisory teams and our client worked extremely well together and have achieved a sale that represents a great result for all concerned.