Livingstone feature in ‘Mid-Market Companies’ Special Report in The Times, 16th July

Livingstone’s Debt Advisory team was asked to comment on financing trends, in a major report on Mid-Market Companies published by Raconteur in The Times.

Mid-market Renaissance

Since the credit crunch, the middle ground has enjoyed a renaissance, partly because the funding vacuum has sucked in a jumble of clever new investment instruments, and banks are changing their tune and backing successful entrepreneurs.

Bill Troup, Managing Director, Debt Advisory at Livingstone, thinks this new environment is a great opportunity for a mix of investments. “The high street banks are looking to lend – it is their business – but increased balance sheet and regulatory pressure means that the quantum and flexibility of the terms of lending are reduced in some circumstances, leaving an opportunity for non-bank lenders,” he says.

“There has been a significant increase in the number of alternative lenders and the funds they have available to lend. Private placement of debt used to be the preserve of larger companies, but competition and opportunity is opening up access to these debt sources for the mid-market.”

Alternative lenders are providing a stiff challenge to the high street banks. Options going beyond the “we give you money, you pay it back plus a bit more” structure include asset-backed lenders, credit funds, hedge funds, distressed debt and private equity

There are more types of funding and more businesses offering them, creating market forces that keep prices and fees in check. The government has waded in too with schemes including Funding for Lending, the British Finance Partnership and the Business Growth Fund, all aimed at larger mid-markets.

According to Calum Paterson, managing partner of Scottish Equity Partners, the choice is so great that “big” medium-sized businesses should consider more than just terms or valuations and look at what non-financial support they can get as part of the deal.

He says: “Market conditions for those seeking venture capital are the best they have been in recent years. Mid-size companies are now attracting interest from some of the larger private equity houses as they seek to increase and diversify their deal flow, while in-bound interest from US firms is increasing.

“Since the credit crunch, the middle ground has enjoyed a renaissance, partly because the funding vacuum has sucked in a jumble of clever new investment instruments.

“Private company valuations have been boosted, in part due to greater appetite and, as a result, greater competition among venture capital firms for deals, but also because of improved exit opportunities with trade sales, IPOs and buy-outs being much more prevalent than in recent years. The economic cycle is also more favourable.”

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