“I don't think we're too exposed”

What key trends are you seeing in the market?
One of the areas that there's been a bit more focus around is portfolio company acquisitions. We've just completed a deal that's gone through with one of our portfolio companies, Axell Wireless, acquiring some assets from Dekolink and there's one or two other things we're looking at across the portfolio as well.

Bolt-ons are, in many respects, manageable transactions in that many of them are quite small. Banks are more prepared I think to lend to existing customers provided things are going well, and even if they're not you've got a leverage structure in there already that you can utilise to make the acquisition.

So the Axell add-on might be the template for deals going forward?
It's a different type of deal in that we were acquiring selected assets from that business and it was a bit of distressed purchase. I think one of the things we're generally looking for in the market at the moment are situations where there's opportunities to acquire smaller businesses that are struggling a bit in the current environment – and hopefully do some good deals at some sensible prices.

Does that mean distressed assets will be an area of focus for 2009?
No, I think it will be one of a number of elements. Some transactions may be born from distressed situations, but most of them will be ordinary growth opportunities.

Aside from bolt-ons, what opportunities do you anticipate will characterise this year?
One key area where we're likely to be finding opportunities is public-to-private deals. We've done a couple of those recently, like the [healthcare IT provider] Ascribe deal which was announced this year. Values have come off in the equities markets as we're all aware. And I think there's certainly more of a willingness on the part of institutional investors to look positively on opportunities to generate some cash.

Where else do you see potential deal flow?
The other area where we think we might find opportunity in 2009 is where perhaps larger corporates have got a level of … not distress, but a bit of pressure, a requirement to repatriate some value back to their shareholders. That might be large corporates or even larger private equity-backed businesses, but for whatever reason they need to divest of these non-core businesses to generate some cash. We see that as an opportunity as a smaller mid-marke t investor looking for deals of £20 million to £150 million of enterprise value. That will fit quite neatly into our sweet-spot.

How is your portfolio's health? Are you taking measures to brace for further economic decline?
Inevitably we're seeing a bit of stress and strain, but nothing too concerning at this point and there's a number of businesses that are actually trading ahead of plan. In the current environment, you want to make sure you're doing everything possible to equip your portfolio as best as you can to weather the storm. We're doing that, but I would say that we're quite comfortable with the sectors we've got into and don't feel that we are overly exposed to the downturn. But having said that, there are no sectors really that are completely immune and even if it's just the generics of the changes in corporate behaviour that you get at these times – customers paying a bit more slowly, suppliers looking to be paid more quickly – these sorts of things do weigh on all businesses across all sectors. But by and large the portfolio is looking in good shape.