CHAMBERS KPMG IRELAND | IB Survey | IB Survey
Funding Your Business The last 12 months have suggested a significant improvement in access to funding for Irish business. Paul Hollway, Head of Corporate Finance in KPMG Ireland, outlines the sources of funding available and some of the key factors to consider when seeking capital.
O
ver the last number of years funding has moved up Irish business leaders’ agenda from being an important item to being a critical one. We have experienced a long period of time when both the quantum and confidence in funding has been at an all-time low. These issues undermined the ability of companies to execute growth-orientated strategies as companies were focused on managing balance sheet or banking covenant risk. Over the last 12 months we have witnessed an improvement in both the availability and terms of financing. While there are certainly challenges in attracting satisfactory funding, the landscape has now improved and the level of deal flow has increased significantly.
Bank lending We are happy to report that over the past 12 months we have advised on significantly more new bank lending draw downs than at any time over the previous five years. Talking to the main players in the marketplace, it is clear that a more normal banking environment is beginning to emerge. It is no longer unusual to have some level of competition for new lending mandates and there appears to be an appetite within the banks to meet lending targets. The banks’ requirements on new loan applications have changed significantly from the last decade. The banks are conducting detailed analysis focused on the ability to repay and the underlying refinancing risk in advance of offering terms. The level of diligence the banks and their advisors will undertake has increased
of the characteristics of both banks and private equity. While they are typically not the cheapest option, non-bank lenders can provide the bridge between the quantum of bank debt that might be available and the level of funds required.
Equity
Non-bank lending
Similar to the other sources of funding discussed, the level of equity available for Irish companies has increased significantly. This is partly down to the increasing attractiveness of Ireland as an investment destination and also as a result of the work of the NTPF (through its Ireland Strategic Investment Fund) and Enterprise Ireland. As a result we believe there is significant funding available not only for M&A but also for transactions such as the buyout of minority shareholders or cash release for founders. In conclusion, we believe that the funding landscape has improved significantly over the last 12 months. In our view the key to successful fundraising is to interact with the market, be properly prepared and to structure the funding proposition in an appropriate manner. While the economic recovery is still at an early stage, we are seeing good companies and good projects getting the funding required.
There are several debt and mezzanine funds providing additional liquidity to the Irish market. These funders have some
Paul Hollway is Head of Corporate Finance in KPMG Ireland.
Paul Hollway
significantly and as a result any business seeking new finance needs to conduct the necessary preparation in advance. Significant consideration is also given to the appropriate funding structure and the different debt instruments that could be utilised. For example, we have noticed an increase in bank appetite for asset-backed lending such as invoice discounting. Companies seeking funding need to consider how best to position themselves to achieve the optimum outcome.
"Talking to the main players in the marketplace, it is clear that a more normal banking environment is beginning to emerge." InBusiness | Q1 2014 53