Contributed by Gary Quaife, Head of the Edward Symmons Collateral Review and Valuation Team. 

We have certainly seen more instances where Private Equity has used an ABL facility to provide funding when making an acquisition, as opposed to the more traditional forms of finance. This in itself was a learning process for both sectors but a relationship that I am sure will blossom over the next five years. 

Where we have seen a change in the marketplace, is that we, as the valuer, are being approached directly by the sponsor to provide the professional advice and valuations prior to going to the ABL marketplace. That’s where our knowledge and experience as Asset Based lenders, along with a strong history of asset valuations, assists the process. The more detailed knowledge and information about the assets we can give the sponsor, the smoother the process of structuring the facility is at the outset. 

By its very nature, an ABL will be a lot closer to the assets against which it has provided funding because they’re receiving daily or weekly information in respect of the performance of the assets, along with the financial performance of the company. This is, and should always be, supported by formal valuations on a regular basis, as the asset values can increase and decrease very quickly. In the last 12 months, the market has seen how much fixed asset values have slipped, primarily in the Plant & Machinery and Property sectors. 

Moving through 2009 and into 2010, mid–market companies will find traditional forms of finance more difficult to access, leading to a number of refinancing and acquisition opportunities. Private Equity will continue to play a pivotal role in this arena, leading to many new opportunities to work more closely with the Asset Based Lenders, now that they have a better understanding of how the offering works and is structured against the asset base. They will continue to be involved in acquisitions, which will involve a restructuring or reshaping of a business, and because of the revolving nature of an ABL facility, it’s a perfect match.

Edward Symmons has been providing financial institutions with asset valuations for over 60 years and, specifically, the Collateral Review and Valuation team provides valuations to the secured lender, including those in ABL and Private Equity markets to support the credit and risk management process.  Gary Quaife can be contacted on 020 7955 8454.

www.edwardsymmons.com