Utilising Invoice Finance during mergers.
Utilising Invoice Finance during mergers or an acquisition provides stability when you need it most. Mergers and acquisitions (M&A) present a strategic opportunity for businesses to expand their reach, customer base and market share. Whilst slightly different, the goal is the same in both a merger and an acquisition: two companies become one entity.
The ONS (Office of National Statistics) monitor Mergers and acquisitions involving UK companies. On the 3rd September 2024 they released Q2 statistics (next release for Q3 is 3rd December 2024):
Main points:
The provisional combined number of domestic and cross-border mergers and acquisitions (M&A) involving a change in majority share ownership was 385 during Quarter 2 (Apr to June) 2024; this was 78 fewer than during Quarter 1 (Jan to Mar) 2024 (463).
There were an estimated total 148 domestic and cross-border acquisitions involving a change in majority share ownership during April 2024, before falling slightly to 144 in May and declining further to 93 in June 2024.
The value of inward M&A (foreign companies acquiring UK companies) in Quarter 2 2024 was £5.0 billion, £0.6 billion lower than the previous quarter (£5.6 billion).
The value of outward M&A (UK companies acquiring foreign companies) in Quarter 2 2024 was £4.2 billion, £0.4 billion less than Quarter 1 2024 (£4.6 billion).
Domestic M&A (UK companies acquiring other UK companies) during Quarter 2 2024 was £2.6 billion, £1.0 billion lower than Quarter 1 2024 (£3.6 billion).
The financial intricacies of mergers and acquisitions are complex. Invoice Finance during mergers can be utilised as a financial tool for UK businesses throughout this period (and beyond).
Navigating Risks with Invoice Finance.
Mitigating Financial Risks
Problem: Merging workforces, technology and business sites can be a challenge, potentially leading to disruptions in productivity and operational efficiency.
Solution: Invoice finance mitigates some financial risks by ensuring a steady cash flow, which is essential for maintaining essential business payments, helping employee retention and business continuity during the integration process.
Bridging the Cash Flow Gap
Problem: Mergers and acquisitions can disrupt a company’s usual billing cycles and lead to temporary cash flow constraints and shortfalls.
Solution: Invoice finance bridges this gap by providing businesses with immediate access to a significant portion of the outstanding invoice value owed to the company. This readily available cash can be used for the merger or to fund various merger-related expenses, such as legal fees, integration costs, and employee severance packages.
Regulation and Security.
Whilst invoice finance is an unregulated industry, there are those who chose to be members of UK Finance who are a finance body designed to promote a safe, transparent, and innovative financial services industry. Ensuring they follow their code of conduct. This framework provides added assurances and peace of mind when choosing an invoice finance partner.
Invoice finance is a proven alternative funding method which can support a successful business merger in the UK. By bridging cash flow gaps, helping to finance the merger, and mitigating financial instability, invoice finance empowers businesses to navigate the complexities of M&A with greater confidence and financial stability.
Overview of Partnership Invoice Finance.
At Partnership Invoice Finance we provide more than a quick funding solution using Invoice Finance during mergers. Our team of professionals become an integral part of your team. With our alternative funding solutions, your business will benefit from:
- Funding amounts that grows as your company grows.
- Personalised service. Our dedicated client managers remain in contact with you rather that an automated service.
- We are members of UK Finance.
Depending on the businesses needs and credit control management, either recourse factoring or disclosed invoice discounting may be more suited.
We welcome you to contact us to discuss your businesses financial landscape, and find out how invoice finance can benefit your company.
Invoice Finance during MBI and MBO.
Invoice finance is flexible, and can also be utilised during MBI’s (Management Buy-in) and MBO’s (Management Buy Out).
Chris Falby (Regional Sales Manager) recently wrote about this topic, see the full post here.
“MBI’s and MBO’s can have different payment plans depending on the agreement between the buyer and the seller. As with most purchases in life – upfront payment (or at least an element of upfront payment) is necessary. For example, staged payments could be made over a set period. Or a percentage of profits could be taken over time rather than a full payment upfront. However, there is likely to still be an initial payment for which buyers will look to source additional funding.
This is where utilising Invoice Finance during mergers comes in.
Invoice finance isn’t a loan, instead it is the acquisition of the businesses outstanding invoices, by an Invoice Finance provider. The business benefits from prepayment against the outstanding invoices, which creates an availability of funds. These funds can be utilised towards the MBO-MBI.”
