It’s a sellers’ market right now, so if you’ve started the process you’re well placed to get top price.

That’s the view of corporate financier Jeremy Furniss of Livingstone Guarantee, a prolific firm specialising in £10m to £50m deals. “There is a shortage of good-quality opportunities but an intensifying of buyers’ appetites.”

He puts the current hunger down to the high availability of debt, enabling private equity investors to access finance for acquisitions, and the reach of US houses extending beyond domestic shores. Factor in the willingness of vendors to explore sale options, putting behind them some difficult years, and the re-emergence of trade buyers, particularly those from abroad, and activity shows few signs of abating soon.

ROOM FOR SCEPTICISM

Howard Leigh of Cavendish Corporate Finance, which has a transaction ‘sweet spot’ of between £20m to £50m, is more sceptical, describing it as a “frothy market, depending on sector”. He agrees on most points, however, and says that it is significantly better than 2002 to 2003, following the dot com recession. “There was a period of retrenchment, but there’s now a wall of private equity money. Plus, a newer phenomenon is that of serial entrepreneurs who have started their businesses with the aim of selling in a relatively short period.”

Leigh also points to taper relief, boosting the desire of entrepreneurs to capitalise on the 75% capital gains tax saving while it’s on offer. In terms of volume the firm completed 22 deals last year and is on course to increase that slightly, with the overall deal values also up on 2004.

CYCLICAL MARKET

The good news for smaller businesses, is that while much of the activity is taking place at the higher end, it’s gradually filtering down and a phalanx of mid-market deals will follow. As with all trends though, there is always the threat that it could quickly turn. “There’s a danger that the bouyancy in the debt market could over-heat and a few high profile companies that have over-geared failing could dent the confidence,” says Furniss. “In turn this could hit the private equity market.”

Furniss, however, predicts that it will remain a strong sellers’ market for at least another six months and that even if debt providers rein in their lending the trade buyers will remain. The interest and finance from the US is also likely to increase as restrictions on spending overseas are relaxed, with the UK the likely top target. “There is a lot of global consolidation going on,” says Furniss. “In the past 10 years 45% of vendors we have dealt with have sold to foreign bidders, yet that figure stands at 60% in 2005.” Leigh adds that buyers from Europe, Ireland and Holland in particular, have materialised in recent months and says that you’ll struggle to find a US buyer for deals under £10m.

WHAT’S HOT, WHAT’S NOT

Popular sectors include consumer branded products (food), marketing communications businesses (CRM, data management, call centres), building products, healthcare, businesses with public sector contracts, technology again, and defence. Currently unpopular are retail, building contractors, contract manufacturing, commercial printing and biotech.