Collaboration has investment hopes for listed firms
There are signs that companies of all sizes in the Midlands are exploring opportunities to work together to increase their chances of surviving and thriving in the economic climate. For listed companies, collaboration can sometimes lead to investment opportunities.
Andy Parker, corporate finance partner at PricewaterhouseCoopers LLP in the Midlands, says: “We are seeing some ‘supplier finance’ initiatives starting up in the Midlands, as larger companies at the top of the supply chain use the strength of their business and their balance sheet to support those further down the chain.
“Losing a supplier can have a devastating impact on the company at the top of the chain that may have grown used to reliable, quality supplies. To avoid the risk of a break in the supply chain, companies can leverage lender relationships imaginatively in order to extend new facilities to their suppliers and, in doing so, help to stabilise the supply chain.”
In the past some Midlands companies have opted to take temporary ownership of a supplier in order to protect it from business failure. While relatively rare and usually undertaken as a last resort, such examples of collaboration can help to ensure the survival of both businesses at a critical time and can generate a healthy return on investment when the target business is eventually re-sold.
According to Mr Parker, joint venturing is another way for companies to benefit from closer working partnerships. He says: “In an upturn, we would expect to see more joint ventures as companies seek to amalgamate their resources in order to strengthen their market position at a time when market growth is being restored.
“While it is early days and we can’t report an increase in joint venture activity at the moment, such initiatives may increase in the months to come.
“In some cases, joint ventures can also act as a catalyst to merger and acquisition activity as companies get a closer view of the financial position and operational and market strengths of their competitors.”
