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14th January 2009
CAT.178
M&A Magazine (Private Equity)
FLEXIBILITY IS THE KEY TO DEALS IN 2009
Catapult Venture Managers enjoyed its best year ever in 2008 completing 27 deals and bucking the downward trend in the marketplace which really hit home from July onwards.
This success has spilled over into 2009 with Catapult completing an investment in Comply-Serve Limited as part of a 0.8m funding round. The company is a ‘software as a service’ business delivering a unique web-based project compliance system to the rail infrastructure sector.
Rob Carroll, Managing Director of Catapult commented: “We are of course delighted to start the year so well, but no one is under the illusion that this year is going to be a particularly easy one.
“Deal activity at the upper end of the market virtually came to a standstill in 2008. Such transactions generally require a relatively small amount of private equity, but require a significant level of debt funding. With banks pulling away from lending, this has significantly reduced activity in this arena.
And it’s not just the banks pulling away from investment. Private investors are also turning their backs – wanting to find a safer haven for their money.
“Cheap debt is no longer ‘cheap’ and it is frequently unavailable - whatever the cost. However, at the smaller end of the deals market there are still deals to be done. We believe our flexibility and approach to dealmaking will enable us to continue to identify and invest in well run businesses.
“Catapult is able to provide equity funding of up to £2m and make available both the financial and professional support to help accelerate the speed at which businesses reach the next stage of development,” he said.
When asked when the tide would turn and the economy would start to improve, Rob Carroll said that it was clearly very difficult to predict. “Towards the end of last year I thought that the economy would bottom around the end of 2009. I still believe that this is likely to be the case, but it’s now really a question of how long we will stay there before we start to see a gradual improvement. My best guess is mid 2010.
“However, that said, there is still a substantial bank of private equity money available for the right business opportunities. Here at Catapult - we are still open for business and being approached by increasing numbers of enterprises looking for funding. In one sense we are benefiting from the situation with the banks generally not doing deals at the moment. However, overall this situation is of course not helpful and will be damaging if is not resolved quickly.
Sectors that are less affected by recession and therefore currently more attractive investment propositions include healthcare, medical devices, environmental and support services.
“With the current lack of confidence across the UK economy, most MBOs now need an element of private equity, but debt funding from the banks is proving difficult to find. This will only start to happen when we return to more normal economic conditions.
“Catapult’s strong deal flow and completion levels show that we continue to invest in this difficult period as there is are still attractive deals to be done. Delivery is the key buzzword in the market at the minute and that's exactly what we are doing," he concluded.
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For further information please contact Rob Carroll at Catapult Venture Managers on 0116 238 8200 or 07976 226252, or Paul Shrimpton at PSPR Ltd on 0121 354 7311 or 07979 505322
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