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It's time to go on the offensive

Published 1st March, 2010 by Neil Nixon

It's time to go on the offensive

According to Plimsoll Publishing Ltd, 116 of the top 1000 businesses in the UK cleaning services industry are woefully exposed to being snapped up as a ‘bargain acquisition’. The research suggests companies that have built up cash reserves over the last few years now need to seize the moment and make an acquisition while it is still a buyers’ market.

David Pattison, senior analyst and author of the latest Plimsoll Analysis, said: “It is clear that the recession has caused a sea change in the cleaning services industry and for companies with cash to spend, there is a pool of targets to choose from. With the market starting to recover its better to spend some of that cash on a discount acquisition than have it sat in the bank.”

Pattison suggests that there are 5 factors at the heart of this: “The recession has forced 282 companies in the market into a loss making position. As profitability has fallen so have company valuations. In fact one company has seen its value fall to just 40% of its previous high. For a company looking for a cheap and easy way to ‘buy in’ some extra market share there are some bargains to be had.

“Despite the lock down in the financial sector, corporate debts are still rising. 48 companies in the UK cleaning services industry now have debt levels which I would class as unmanageable. Some great businesses are available for those able to finance a bail out.

“We are seeing an ageing set of owners in the market with 500 individuals working beyond retirement age. How many of these older owners have the appetite to rebuild their businesses battered by the last 2 years? Of course some will still have the stomach for it but for many a potential sale must be a serious consideration.

“Those companies that didn’t make quick, targeted cuts in the face of falling demand are no longer competitive in the current market. 446 such companies are now well behind the curve and a merger or takeover could be the best way to recoup the economies of scale quickly. New owners would be looking to trim the excess quickly, and slashing jobs seem the most obvious place to start.

“I was shocked at the level of cash in the market currently. I identified 400 companies that I would class as ‘cash rich’ that have the facilities to finance the right deal at the right price. For any owner looking to sell their business, these are the guys they should be courting.”

The new Plimsoll Industry Analysis - Cleaning Services gives an instant performance rating on the top 1000 companies in the market, an overview of which companies are ripe for acquisition, and who is set to be buying. A graphical and written analysis will also tell you which companies are in trouble and who is getting it right.

Readers of Cleaning and Maintenance are entitled to a £50 discount of this new special edition of the Plimsoll Industry Analysis - Cleaning Services. Call 01642 626400 for further details and quote reference PR/SV20.

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