Financing Your Strategy - download your free report

Thursday, May 13, 2010 | Posted by: Fiona Cullinan
Categories: Business advice, Financing , Thought Leadership | Tags: business, economy, research, finance, survey, international, strategy, growth, data, M&A, analysis, debt, funding, recovery, financial crisis, mid-market, cost-cutting, lending

Grant Thornton’s latest research in conjunction with Mergermarket surveyed 150 CEOs and CFOs in the first quarter of 2010 on how and where the UK’s mid-market businesses are looking to fund present and future growth. The Financing Your Strategy report, released this week gives a broad overview of trends as well as data from specific sectors. We’ve highlighted the key findings here…

Survey overview
Survey respondents were asked to give their opinions on the challenges and opportunities involved in today’s market, how it is affecting their business, their funding and finance issues, and corporate strategy and growth plans.

Findings
* Generally, mid-market businesses are finding the road to recovery to be a long haul with the macroeconomic environment staying a cause for concern and the lack of market visibility (on interest/exchange rates, potential tax changes, etc) making it difficult for firms to forecast future performance.

* 56% of decision-makers at British mid-market firms consider their business sector to be still in recession. The survey showed significant differences across sectors but this was felt particularly strongly in both Construction (87%) and Industrials & Chemicals (58%).

* Financing remains a key challenge, although companies are starting to adapt to the tougher environment. There has been a shift away from debt financing, and this is not set to change in the foreseeable future with 64% of respondents most likely to use internal resources to finance their corporate strategy over the next three years.

* The relationship between corporates and banks has been redefined as a result of the financial crisis, with respondents noting a difference in lending attitudes: 50% say that the cost of financing has increased, and 35% believe that banks are imposing stricter terms and lending requirements.

* More than two-thirds of respondents (67%) stated that cost reduction has been a high priority underpinning their business strategy over the past 12-18 months.

* 64% of respondents plan to expand their market share over the next 12 months. Despite tighter lending, a number of corporates now seem ready to emerge from cost-cutting ‘survival mode’ to pursue growth and expansion strategies. For many, and depending on the sector, this is a balancing act of keeping one foot on the brake as the other eases onto the accelerator.

* M&A is gradually returning to the corporate agenda in the UK with 27% of respondents explicitly planning to expand via acquisitions over the next 12-18 months.

* Lagging growth at home has made international expansion a focus, with 19% of respondents planning to achieve growth in this way over the next 18 months.

Financing implications
Having shored up their balance sheets, mid-market companies are showing signs of more bullish behaviour. But financing is set to remain a key issue, especially for those looking at moving into international markets or involved in M&A.

David Ascott, Corporate Finance Partner at Grant Thornton UK, says in the report:

‘Mid-market firms are shifting their focus from cost reduction to growing their market share. Most seek organic growth, but more than a quarter expect to complete M&A deals in the coming 18 months. We acted as lead advisors to 14 mid-market M&A transactions in the year to date, which shows that acquisition finance is available for compelling deals. Unfortunately debt pricing has nearly doubled in recent years.’

Download the report
To find out more about current business financing trends and tactics, and how to manage international expansion, download Financing Your Strategy or read more about it on our dedicated site.

We’ll also shortly be posting about our Financing Your Strategy event held this week, featuring a panel debate and video voxpops on what CEOs/CFOs want the incoming government to do to improve the financing environment.