Print Published 1st Aug 2017, 13:46

Marketing groups need shareholders to balance acquisition funding

Balance sheet vulnerability survey 2017 front page

A new survey of UK publicly listed marketing groups by Marketing Services Financial Intelligence shows that their recent expansion has continued to rely on borrowings to a greater extent than shareholders’ funds.

During 2016 UK publicly listed marketing groups invested an additional £3.5 billion in their  businesses, growing their collective asset base by 22.9%, the annual Balance Sheet Vulnerability Survey reveals. “And those companies were resorting increasingly to banks and vendors for their funding, rather than to shareholders , thereby continuing the trend reported last year”, the survey shows.

Nevertheless, shareholders stumped up a further £1.8 billion – an increase of 20.5% – either in the form of profits left in the business or in new share capital – and remained the biggest single source of expansion finance. But despite that contribution, shareholders were providing a smaller proportion of total funds – 57.1% – than a year earlier.

The biggest growth in borrowings came from vendors of acquired companies in the form of estimated deferred payments and option obligations that grew by 51.9%. Bank borrowings grew by 26.9%.  Bank borrowings may grow even more when earnout and put option payments have to be settled unless shareholders provide more capital, the report points out.

The 2017 Balance Sheet Vulnerability Survey is available free to subscribers now.