"Marketing groups need shareholders to balance acquisition funding"

BLOCKLEY, U.K. - Aug. 1, 2017 - PRLog -- A new survey of UK publicly listed marketing groups shows that their recent expansion by acquisition or otherwise 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%. "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 report by Marketing Services Financial Intelligence said.

"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 pointed out.

The survey alludes to the "Brexit cloud" and the economic uncertainty that comes with it, predicting that it will almost certainly slow growth in the domestic market, to the detriment of any heavily indebted businesses. "Those groups that have already established strong businesses abroad - or whose balance sheets are strong enough for them to risk doing so now – may find the future rewards outweigh the risk", editor Bob Willott said.

"What can be said with some certainty is that, at times like this, companies need a strong and secure foundation of shareholders' funds to weather whatever storms may lie ahead. They should remember that shares, rather than bank loans, offer the best form of risk capital with the least vulnerable consequences."

Further information from www.fintellect.com