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After a slow start, it is good to see that the Business Growth Fund (BGF) invested £120m in 24 companies in 2012 with 3 in the Midlands: £10m in GCI Telecom, £3m in Shuropody and £4.8m in Wow! Stuff.
BGF is planning to invest £200m in 2013, typically in tranches of £2m to £10m taking a minority stake and Board seat. BGF is a good alternative to bank debt for fast growing businesses seeking development capital.
At last some good news from the Chancellor! The Autumn Statement now confirms that under EMI (Enterprise Management Incentive) share options, it will not be necessary to own at least 5% of the Company’s shares to qualify for a 10% Capital Gains Tax rate under Entrepreneurs’ Relief provisions.
Currently, EMI options qualify for tax relief, which provides for any growth in the value of shares to generally be exempt from any income tax. Any gain arising on the subsequent sale of the shares via the exercise of a qualifying EMI option is generally subject to Capital Gains Tax at 28%
Under the new rules, Capital Gains Tax arising from the sale of shares which were previously acquired via the exercise of qualifying EMI options will be at the Entrepreneurs’ Relief rate of 10% so long as the EMI shares have been held for at least 12 months.
The new rules will only apply to shares sold on or after 6th April 2013 for EMI schemes set up on or after 6th April 2012.
This is good news for EMI option schemes which is a good way for owner managers to incentivise and retain key staff.
Bishopsgate has now completed a hat trick of deals involving Tropical Marine Centre, with the latest debt-only MBO that sees the TMC MD Paul West and his management team taking a controlling stake, with the deal completing on 21st December.
Bishopsgate has a 17 year relationship with TMC, selling the original business to Cranswick plc in 1995. We subsequently advised on the MBO of Cranswick Pet Products (including TMC) – a LDC backed buy-out in 2009, and the latest MBO completes the TMC hat trick.
We wish Paul West and his team well in the next stage of development at TMC, Europe’s leading supplier of ethnically sourced marine livestock and one of the world’s leading aquatic brands.
With the latest Budget announcing that UK corporation tax rate will fall to 24% next year with a further target to reduce the rate to 22%, cross-border deals are accounting for an increasing proportion of UK M&A activity.
About a third of Bishopsgate’s recent deals have been cross-border and we believe this trend will increase with Asia/India becoming more prominent. Traditionally, the bulk of cross-border activity has been focused on the US and Europe but we have seen a sharp rise in interest from Asia and this can only have a positive effect on sale prices. The UK is seen as a good place to do business and we expect cross-border activity to increase as we continue our slow path to economic recovery.
The number of deals in the Midlands fell in the first 6 months of 2012 compared to 2011 according to Experian.
The number of transactions dropped from 2,339 to 2,084 reflecting the continued drought in bank lending.
The Bishop expects the M&A market to remain subdued for the remainder of the year.
Despite this, Bishopsgate continues to have a healthy pipeline of deals and completed two transactions in June.
Despite the continued gloom in the Eurozone, Bishopsgate was pleased to announce the completion of two deals in June, the MBO of Education Personnel Management (“EPM”) and the disposal of Kingston Foods to Cranswick plc, both for undisclosed sums.
EPM provides personnel and consultancy services to over 700 schools across the UK and the funding for the transaction was provided by RBS.
The disposal of Kingston Foods represents Bishopsgate’s third deal with Cranswick plc and takes them into the fast growing food service and restaurant sector. Well done to Tom Spencer who was lead adviser on both transactions.
The recovery in private equity’s lower mid-market continued in Q1 of 2012 according to Cass Business School, with 20 deals completing valued between £10 million and £100 million.
The recovery contrasted with the sub £10 million buy-out market which remains subdued, with low levels of deal activity.
The report showed that 40% of the deals were in the UK’s support services sector. There were 6 exits in the first 3 months of this year compared to 12 in the same period of 2011, with exits to strategic buyers remaining prominent, confirming that corporate buyers are active in the lower mid-market.
Despite the ongoing Eurozone sovereign debt crisis, the UK M&A market remains resilient and the Bishopsgate pipeline continues to be strong.
The Allen & Overy M&A index showed a 12% increase in value of cross-border deals in 2011 compared to 2010, and we expect this trend to continue in 2012 with cash rich corporates looking to enter the market.
For private equity players in particular, there is pressure to do deals which will continue to create a pipeline of deals. As ever, the problem for both buyers and sellers right now is the availability of debt funding and this will continue to keep multiples at sensible levels.
The Bishop is delighted to report on Bishopsgate’s latest deal, the sale of Creative Tops Limited to Nasdaq quoted, Lifetime Brands Inc, one of the largest table top and kitchenware companies in the US.
This is Bishopsgate’s second US cross-border deal this year and we wish the Creative Tops team every success in the next stage of its growth story.
Creative Tops is a highly regarded tableware and kitchen products business with operations in Corby and Hong Kong, and the acquisition will provide Lifetime with the springboard to expand into the European market. Lifetime has sales of US$500m and an extensive portfolio of brands such as KitchenAid and Farberware.
Bishopsgate project managed the transaction from start to finish and we are delighted for the Vendors, Pat Dawson and Jon Driver, and we wish them and the management team well.