Newspaper article The Journal (Newcastle, England)

PwC Provide Support to a Large Number of Firms

Newspaper article The Journal (Newcastle, England)

PwC Provide Support to a Large Number of Firms

Article excerpt

Byline: By Chris Heatlie

2006 has been another busy year for local companies in the transaction market with Pricewaterhouse Coopers providing transaction support to a large number of these companies as well as to a number of our local public sector organisations.

Our work in 2006 has included the usual mix of acquisition due diligence, vendor due diligence and refinancing work. In addition, our workload has also been significantly influenced by the favourable conditions in the public markets, with a number of our clients floating or preparing for flotation.

A strong final quarter made 2006 a record year for European IPOs, with London leading the way with the highest number of IPOs and the most money raised of all the European markets, despite signs of a slow down on AIM in the last quarter.

Foreign exchange (particularly the weakening of the US dollar), fluctuating energy costs, the continued dominance of the large supermarket chains, the impact of the internet, offshore purchasing and production decisions, pension issues and International Financial Reporting Standards have all been factors in the deals we have seen this year, and these issues are likely to continue in 2007.

The impact of such issues can make comparing the financial performance of a company from one year to another difficult and can drive buyers and finance providers to focus on a company's pro-forma EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation).

When a business is subject to a transaction (either a change of ownership or a refinancing) potential purchasers and banks will often ask us to comment on the pro-forma EBITDA of the business, with a view to structuring a debt package based on a multiple of this number. This is on the presumption that if a business can maintain a steady trading performance and convert its profits to cash this will help give comfort on the level of indebtedness that the business can support going forward. …

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