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2012: just a re-tread? 5 Jan 2012

The start of a new year ought to be a time for fresh beginnings. But there are already signs that much of the news for UK businesses this year is going to be a re-hash of previous years.

First up, we have a nice reprise of 2008, with dire warnings about a fresh credit crunch from the Deloitte CFO survey. That's potentially bad news for everyone, but promises to be particularly vexing for private equity firms looking to create opportunities from the poor economy. (The good news is that it doesn't look like being as bad this time round.) True, there remains plenty of equity around, and more PE houses seem to be willing to go all-equity on the right deals. But debt always oils the wheels.

Next we'll throw in a bit of 2009-era early-year stock market rally in the face of seemingly terrifying news. That doesn't mean that the big indices are going to have a great year, of course (in 2009, they started from a pretty apocalyptic level). But it does suggest big-ticket equities (most with healthy balance sheets and global exposure) are still seen as something of safe haven. That's also cold comfort for mid-market management looking at a static UK economy and wondering whether the good news is coming from. (Would that we did have a repeat of 2010 and 2011 in store on spending cuts when the government promised much, but didn't actually lay off that many people.) But it also suggests smart companies will copy the blue chips: keep cash on hand, play in reliable markets and get some exposure to economies that are still growing.

But there are other reasons for optimism this year if you're running a mid-market business backed by private equity. Because the biggest re-tread of all is that the fundamentals haven't changed in 2012. Backers want to see tightly controlled finances, investment in growth and a willingness to take managed risks. FDs and FCs will always get a pat on the back for outstanding cash management, for example. That was true 20 years ago, never mind two.

And if you can spot distressed assets - there will be plenty coming into the market this year as refinancings bite, the banks tire of shepherding zombie companies and trading catches up with some businesses - then there will be opportunities to do a spot of buy-and-build. PE backers know that their upside is growing the top line and having management in place to ensure plenty of that makes it to EBITDA.And that means having a great finance team in place.