Friday, April 8, 2011
The Channel Islands’ economic vigour has led to a marked increase in merger and acquisition activity in the islands, proving that the two territories continue to offer a welcoming base for financial services businesses.
Representatives from the Channel Islands' offices of KPMG told senior figures in the finance sector at seminars in Guernsey and Jersey that the high-profile acquisitions of Close Brothers Offshore Group by Kleinwort Benson in early March was a sign of the times. The most recent evidence of this came in the following sucessful merger of Collas Crill, the amalgamation of Jersey-firm Crill Canavan and Guernsey-firm Collas Day, on April 4.
Seminar attendees were told of a significant rise in merger and acquisition activity in the past twelve months, following a less pronounced increase in activity in the previous year. A trend to reduce the amount of debt used to finance transactions was also observed. Many deals are going through with relatively low cash-payments up front, followed by performance-driven deferred payments.
“We are seeing more activity in the islands as the economy continues to come out of recession,” said Robert Kirkby, Advisory Director at KPMG in the Channel Islands. “There was still some uncertainty last year, with the Alternative Investment Funds Directive and the future of Zero-10, but now business is picking up, and some of the significant deals we are seeing act as a barometer for businesses confidence in this area.”
“The Channel Islands remain an attractive market for mergers and acquisitions, both for deals within the island and for companies entering the islands, either from the UK or other offshore jurisdictions,” he added.
However, Mark Ashburn, Senior Manager in Advisory Services at KPMG in the Channel Islands, said that research carried out by KPMG had revealed that nearly half of companies who had gone through a sales process in recent years felt that they had failed to maximize the company’s value at the time of sale. Even a quarter of private equity firms had not managed to realize full sales value.
Ashburn told attendees that businesses had to be prepared to accept that deals would take time to complete, commonly between six months and a year and sometimes longer. In the current climate too, sellers would need to be realistic around their expectations over the sale price, he said.
The seminar also considered the early stages of buying or selling a business, including identifying potential purchase targets and interested purchasers, and some of the pertinent tax issues around mergers and acquisitions.