Dave Fox, chief executive of Spaldings, was not looking to sell his business when a giant Japanese company came knocking last year. While the adage that any business owner will sell up for the right price may apply, Mr Fox says the fear that his agricultural machinery parts distributor was stagnating was as important as the prospect of a big payday reports The Telegraph.
“We weren’t for sale. Then I started thinking, we’re reaching the stage where I’d have to borrow money to expand. What they brought to the table kept me talking.”
The £25m turnover company sold a 95pc stake to Marubeni, a trading house, in May. It’s the kind of approach that’s becoming more common: according to Cavendish Corporate Finance, overseas acquisitions of companies with sales of less than £50m have risen by 86pc over the past three months compared with the same period last year.
Dougal Bennett, partner of mid-market private equity firm Dunedin, confirms the trend but argues it isn’t clear whether it is down to “overseas buyers [generally] paying more or because they’re the only viable purchasers. I suspect it’s a bit of both”.
The origins of overseas buyers, traditionally dominated by the US and Europe, is also diversifying. In the first five months of this year, the US accounted for 32.4pc of overall “inward acquisition” deal value, down from 54.7pc in the same period last year, Cavendish’s research shows. Asia – excluding Japan – jumped 122pc over the same period.
Paul Herman, chief executive of pre-sale planning company Bluebox, says owners with one eye on the exit should consider tailoring their approach to attract overseas interest. “You need to be on their radar, so that’s things like exporting, some PR in target territories – telling your story rather than talking about selling – even exploring small joint ventures with potential buyers. And complying with international standards – if you can’t demonstrate that you’re compliant with the Bribery Act, you won’t get a US buyer, for example.”
Despite the increase in Asian buyers, he says the impact for owners of small companies has been overstated by corporate finance firms: “Everyone says it’s all Asia but getting the attention of a Chinese or Indian buyer is more challenging. It’s not as significant as some would have you believe.”
