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Legal & Finance: Corporate ventures up as markets slide.

2001 looks like being a record year for new style corporate venturing initiatives in the West Midlands.

That's the prediction of the Birmingham office of commercial law firm DLA, and it comes despite fears of an economic slowdown.

Profits warnings from the US companies are affecting British market confidence and DLA says that that is ruling out immediate plans for flotations among West Midland companies.

With the London stock market sinking to levels last seen in 1998, DLA argues that save for very few, the doors to flotation will remain closed for at least six months.

That leaves corporate venturing as the best competitive weapon for companies urgently in need of cash to grow their business.

John Jackson, corporate partner at the Birmingham office of DLA, said: 'Even if the West Midlands only goes part of the way to emulating the US experience, then corporate venturing activity stands to sky rocket over the next 12 months.'

A relatively-new concept in the UK, corporate venturing has seen encouraging growth with more and more small and medium-sized enterprises turning to their larger counterparts to form a direct alliance.

According to a survey published last year by the CBI, DTI and NatWest, the early signs are that the UK has adopted corporate venturing very successfully. Over 73 per cent of SMEs which have entered alliances have generated growth in turnover as a result.

With an increasing number of plcs and top corporations investing directly in the region's smaller businesses, the success of corporate venturing has been traditionally fostered through the idea that commercial risks and resultant rewards are shared between the two partners.

Mr Jackson added: 'Growing businesses would be wise to minimise the risks of a future exit and look to bank at least part of their companies' value now.

'The beauty of corporate venturing is that both parties see themselves as being on the same side, hoping to be future winners.'
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Publication:The Birmingham Post (England)
Date:Apr 27, 2001
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