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Opportunity in adversity

By Dan Teuton
30 November 2018
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Fables tell us to look before we leap… but also that fortune favours the brave. So how is the wise business leader meant to judge the balance during the prediction confounding Brexit countdown? Strike out beyond Europe or sit tight in the UK, head down, until the dust settles? After four years of BDO’s South Central Mid Market campaign Kim Hayward and Arbinder Chatwal discuss the here and now – and the what next.

“I think the big message is that every business should be re-evaluating its international strategy – not just because of Brexit, but given what’s going on in the States with Trump and protectionism. The Indian and Chinese markets are also showing different trends,” says partner Hayward.

Until now, businesses in the region have impressively managed to strike a balance between taking risks and caution – especially when building new global markets.

“A good example on our patch is a classic mid-market company turning over less than £20 million, making medical equipment,” says fellow partner Chatwal. “They’ve gone and set up in Romania and India in the past 18 months. The supply chain and the opportunities are moving out there, so they’ve done a lot more diligence, but put a presence on the ground in those two territories. 

“One of the mantras we’ve pushed with clients before they go into new markets is that you can’t do enough homework or due diligence. You go over, looking for trade, looking for the nuances; the culture. If it’s made them more cautious, more aware, that’s a positive benefit.”

But time spent on due diligence can be costly for some, says Hayward: “The downside is for the very agile businesses, the young, fast-growing tech companies, waiting a year or 18 months, the danger is you’ve missed the boat.

“Many tech companies are focusing predominantly on market size opportunities so they tend to be looking to North America; they might be looking to China or India these days, but much less so. Certainly some of the telco businesses are keeping their foot on the gas because if they don’t move in then competitors will.”

Chatwal adds: “JDi (Just Develop iT) are a good example – an ambitious, diverse business; investing in cutting edge tech – a really young, dynamic management team have thrown more caution to the wind, seized the maximum opportunity and they’re really benefiting.”

Hayward’s next example is Romsey-based railway and fleet management company Perpetuum.

“Their technology sits on railway rolling stock, monitoring its condition so maintenance can be optimised and surprises avoided. They are investing and pushing out their products all over the world. India was one of the first territories and I think they’ve got six or eight now, over the past two years.

"It’s unique world-leading technology and they know alternatives will emerge, so part of their urgency is getting out there before their competitors do. They have their product operating in Europe, North America, Australia and India. While not necessarily immune to the impact of Brexit, they’ve given themselves a very wide geographical trading platform which is going to be really beneficial.”

But for every company leaping, there are those that must pause and reflect. “Some of our businesses locally that have lifelong relationships in Germany, France and Holland, are maybe exposed, depending on which way Brexit plays out,” says Hayward.

“There are businesses uncomfortably focused on Northern Europe for their future, probably making relatively good short-term gains with exporters through the exchange rates, but vulnerable to the wrong result and trading barriers emerging. They would be the ones that concern me.”

Yet Chatwal and Hayward still relish what’s ahead.

“We’re on the cusp of an important shift in the world as we know it,” says Hayward. “Arbinder and I are very lucky to work with a lot of foreign businesses so we get quite excited by all these international possibilities. “

 

 

BDO have just announced this year’s Top 10 Central South Mid Market companies growing globally; for details please contact Cheryl Martin: [email protected]

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