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Smaller deals will find funding easier

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Mid-market funding
is out there

By Paul Driscoll on June 24 2008

There is readily available capital for well-managed mid-market deals, according to a report by adviser Grant Thornton.

At a meeting of regional business leaders the accountant’s head of corporate finance, Ian Marwood, discussed the findings and said that there was an emphasis on quality deals, but larger transactions had become scarce.

“What's clearly the case is that we face a challenging economic environment and many businesses will suffer as a result,” said Marwood.

He added that the credit situation had “changed the banking market - there's no two ways about it - and there's plenty of uncertainty within the market. It's clear that the market for the bigger buy-outs has dried up, but the mid-market is much more robust.”

The report was compiled by Grant Thornton in Leeds and Directorbank, a director recruitment business focused on private equity deals.

The survey polled 283 directors involved in private equity-backed management buy-outs (MBOs) and buy-ins (MBIs).

The report found that directors have to spend longer on raising finance; half of those involved in MBOs met at least five separate investors, while a third spoke to at least seven. Two-thirds of MBI deal-makers said they spoke to seven or more investors.

A total of 43 per cent of those who had participated in an MBI had spent more than 12 months searching for suitable backing.

Marwood concluded that the next 12 months would be tough, but added “good businesses will attract funding. But the key to that is good management.”

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