At the other end of the scale are 49 major companies that are expanding rapidly, largely through acquisitions, and 152 “predators” who are using the misfortune of others to clean up in the market.
Plimsoll’s senior analyst, David Pattison, said: “The 87 takeover targets we have identified generally have a similar profile – they are privately owned, are in financial difficulty and have owners who are approaching retirement. Any firm in this position should be listening to the warning bells, because its potential selling price will be in the bargain basement. The other 163 distressed companies are operating as divisions of larger parents. I’m fairly certain that conversations are going on behind closed doors about their future.”
The big players in the market are focusing on companies with sales of around £5m. Interestingly, some are being bought not just because they offer good value for money and an extra foothold in the market, but in case they fall into the hands of competitors. The 82 companies that fall into this bracket are in the fortunate position of being in a sellers’ market, so they are able to name increasingly higher prices as availability reduces.
Said David Pattison: “These are typically the two classic profiles of the takeover target – up-and-coming industry players and those who have fallen on hard times. Sadly, in the latter category we see some firms that were doing very well only a few years ago but allowed costs, debts and margins to get out of hand. It’s worth saying that our research has identified 309 companies whose current value is 50% lower than a credible future value. Potential new owners believe that they can run the company better than the current owners and turn this future value into hard cash. Against a background of over capacity, rising costs and falling margins, consolidation in the UK telecommunications services market is inevitable in 2007.”