Pointing the best way to grow
Achieving growth in a business is one thing, maintaining it is another. Martin Hulls, partner and head of corporate finance at Ward Hadaway, has some pointers on how to keep growing.
GROWING a business successfully is not the easiest thing even in the best of times.
Achieving expansion during a downturn is even more difficult, so all the members of this year’s Fastest 50 deserve the highest of plaudits for their achievements so far.
Those last two words are the most important. The best companies are never content to sit back and bask in their success – they know, particularly in the current climate, that standing still for a while really means going backwards.
So once growth has been achieved, how do you set about maintaining the momentum?
Growing organically is how many of the Fastest 50 of 2009 have achieved their place on the list, increasing turnover whilst keeping a wary eye on the bottom line.
Companies can access their cash reserves to finance such growth, but with many businesses seeing their reserves dwindle in the face of the downturn, securing external investment is often the preferred path to further expansion.
No-one is going to pretend that access to growth finance is as simple and straightforward as it was even two years ago – the credit crunch and global banking crisis have seen to that.
However, banks still remain willing to lend money to the right kind of businesses with strong management, good ideas and a proven track record.
There are also signs that the market for business lending is beginning to gather speed after a prolonged thaw. As ever, prudent businesses will make sure they do their sums before taking on bank finance to ensure repayments can be met without hampering expansion plans or damaging cashflow.
Venture capital and private equity firms are also very much on the hunt to make investments in businesses with the potential for fast growth. The impending arrival of the £125m JEREMIE ‘superfund’ will provide up to 850 businesses in the North East with the potential to gain vital investment for their enterprises and is a major reason for optimism going into 2010.
While the current climate has made it difficult for many businesses, it has also provided opportunities for others.
With finance tighter and some companies finding the going tough, businesses on a stronger financial footing may be in a better position to expand by picking up rivals at more competitive prices.
Again, there are definite signs of a revival in merger and acquisition activity in the marketplace and the chance to bolt on a business at a bargain price is a tempting one for many companies.
However, whilst there are opportunities in buying companies in difficulties, there are also pitfalls for the unwary. At Ward Hadaway, we have set up a special Distressed Solutions team which takes companies through important issues associated with buying businesses in difficulties, addressing topics including timing, ongoing commitments, creditors, employment, tax implications, integration and reorganisation.
A stock market flotation is another option for companies looking to grow and to increase their profile.
Becoming a plc opens up additional access to capital and allows companies to use shares to fund acquisitions, although you need to be prepared for the additional rules and regulations which public companies need to abide by.
Ward Hadaway acts for more than half of the North East’s plcs so we can help with all aspects of becoming a public company.
For those who feel they have taken their business as far as they can – or who want to enjoy the rewards of their work or move on to a new venture – selling up is one of the most important decisions they will ever make.
Selling your business to a trade buyer needs careful planning and advice to ensure you get the best deal. After all, no-one wants to feel they are selling themselves short.
Selling up to your existing management team is another option, but they may need advice on picking the best funder to finance the MBO and on the future structure of the company. Our long experience of trade sales and MBOs leaves us well placed to advise in such scenarios.
:: For more information issues raised by this article, or on any other aspect of corporate finance, please contact Martin Hulls at martin.hulls@wardhadaway.com or on (0191) 204-4215.
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