Distressed businesses represent opportunity for entrepreneurs

Distressed business deals are still a strong feature of the mergers and acquisitions market, according to research conducted by Experian Corpfin, on behalf of insolvency trade body R3.

A significant proportion of all deals in the second half of 2010 involved the purchase of an insolvent business – that equates to one in 13 of all large deal transactions.

Experian found that a total of 100 large deals involved the purchase of businesses out of administration in the last six months of 2010.

Begbies Traynor has reported that for the last quarter of 2010 about 148,000 businesses faced serious financial difficulties. Many hundreds of smaller 'distressed' business deals ensued.

Steven Law, president of R3 commented: “Insolvent deals have been running at high levels since mid-2008, when the economic problems began to set in. The numbers peaked between mid-2009 and the middle of last year, and have since fallen back to the levels of early 2009.”

“Buyers who have had the money have been taking the opportunity to pick up businesses and assets during the downturn while values remain low.”

Mr Law indicated that the UK can expect 2011 to be another “difficult year for business”. He would advise buyers on the look out that there remains “a window of opportunity” to snap up failing businesses that really only need strong management.

Begbies Traynor has predicted that small business insolvencies will increase by ten per cent in 2011. The figure suggests that up to 23,500 small businesses could potentially fail, with those in the retail industry particularly at risk.

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