Dearth of capital hits owner-bosses worst

OWNER-MANAGERS are the biggest victims of the slowdown in corporate activity as they struggle to secure capital to grow their businesses, claim experts.

This segment of the market has witnessed a particular dearth of activity, according to law firm HBJ Gateley, while there is still a reasonable pipeline of activity in the capital markets and around early-stage firms.

Andrew Ley, corporate partner at HBJ, said company owners who do not want to relinquish stakes to private equity firms are finding it particularly tough.

Many are capital constrained due to continued problems around bank lending and are, therefore, finding it difficult to discover ways to expand and develop their businesses.

Company owners who are nearing retirement, and who would ordinarily have looked to sell their firms, are also having to hold out as valuations are low and buyers are few and far between.

“Where it’s difficult is for the own-manager businesses mid-market who are not attracted to private equity but are still trying to grow. They are the guys who are struggling the most to do deals.

“If you are one of these people who are nearing retirement age and would naturally want to sell out – that’s where it’s tough.”

He said some owner-managers have spied opportunities by buying assets on the cheap from firms that have gone into administration.

David Kirchin, another corporate specialist at the HBJ, said there had been a reasonable amount of activity at the two poles of the market although no deal his firm had acted on recently has involved bank finance.

He said activity in the capital markets was being buoyed to an extent by overseas investors – particularly from the US, even though Wall Street has been rocked by the debt downgrade.

“American corporates are doing quite well and are making quite a lot of money despite what’s happening in the markets,” he said.