Scottish SME deal flows ‘stalling’ due to lack of preparation
Experts weigh in on how best to get ready for due diligence and make the best exit
Hello Rainmakers,
Scottish deal flows are being stalled by a lack of preparedness for sale by many of the nation’s small and medium-sized enterprises (SMEs).
Peter Walker gets the skinny from funders about how they can deploy all that dry powder.
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Several leaders in the sector agree that poorly prepared accounts, disparate data and a lack of due diligence awareness are resulting in private equity money often having to go elsewhere to complete transactions.
Melanie Clark, partner at Aberdeen-based corporate finance firm Quantify Advisors, told Rainmakers that there’s plenty of money in the Scottish private equity community ready to be deployed, but the number of investment opportunities has fallen recently.
“There is certainly a lot of uncertainty in the market, combined with constantly increasing tax rates, which can deter business owners from deciding to sell,” she commented. “But businesses just don’t seem to be ready for sale, even ones which are actively listed with brokers.
“They haven’t taken the time to ensure that the financial information is tidy, complete or in a format that can be used for diligence.”
Clark continued: “This is the case in a lot of businesses we see; they can have a solid growth story, but the financials look messy, which is often just due to finance teams simply being overstretched and not having the time or resource.
“Which means that to do deals, investors are having to think more creatively around dealmaking, or look at slightly lower quality investments than they previously would have.
