Opportunities shine amid the gloom
Published: 18 May, 2009
STOCKTON-ON-TEES: News in the UK builders' merchants industry is grim: with a record number of companies losing money, and overall business values plummeting to the extent that almost half are now worth less than half their value of 12 months ago. Although difficult to find much good news, a recent study by industry analysts Plimsoll Publishing, suggests that the current economic downturn represents one of the biggest opportunities in a generation – if companies have courage and capital.
The study has rated each of the UK’s leading 1000 builders merchants companies on their acquisition attractiveness. It found that 60 companies are 'ripe for the picking' based on a combined scoring system, incorporating overall financial strength, ownership, valuation and future potential. These 60 companies are all privately owned, yet are showing a serious deterioration in their financial performance. Given the reluctance of the banks to lend more, their time, money and options are running out.
David Pattison, senior analyst at Plimsoll, explained: “What we have indentified is a group of ‘wounded animals’. Many of these businesses have a long and distinguished history, yet their recent performance has deteriorated. By definition, these are classic acquisitions.
"Anyone looking to grow their own company through acquisition should be looking for businesses that are currently undervalued yet, with help, can be turned around.”
This will not be easy, he stated. "Many will need rapid and deep cost-cutting to get them back on a firm financial footing. We could see as many as 3000 jobs go over the next 12 to 24 months as these companies shrink to ensure their survival.”
Despite this dour prediction, Mr Pattison can see a massive opportunity in the UK builders' merchants market. “The current market conditions have presented a set of opportunities to buy into a business that even a year ago would have been unaffordable. We know of at least 547 companies within the industry who have the cash to spend and who could aid these 60 ailing businesses and ensure their survival.”
"The full analysis will help anyone in the industry, not only those looking to snap up a cheap acquisition, but also those looking for an investor, buyer to help target those with cash to spend."