The latest Experian Market IQ figures listing corporate finance deals which occurred during 2018 show a mixed picture.
Despite the optimism that many advisers in the South West talked about a year ago, overall deal volumes continued their annual decline in the region and fell by 12% in contrast to the national picture where they increased marginally. Whilst in absolute terms they remained above the level for six of the last ten years, since the peak in 2016 the trend has been downwards with this accelerating significantly in the last quarter of 2018.
Although local advisers and funders continue to be busy, many report that the time taken to complete transactions is taking longer and they have been working on more transactions out of the region. These factors, combined with the marked increase in the average size of completed deals, could partly explain the apparent contradiction in the local statistics.
The volumes of buyout/in deals recovered both across the South West and nationally after a significant drop in 2017.While the details behind funding for these deals are only disclosed in just over half of the transactions, the number of debt and equity funded deals was unchanged on 2017. MBO’S in the South West have always been a key means of succession planning where a suitable trade buyer cannot be found often due to geographical or shareholder restrictions. As such the increase in MBO/I transactions indicates that advisers are finding funding solutions outside of the traditional routes to achieve these transactions.
Andy Killick Head of Corporate Finance at PKF Francis Clark said:
“The figures for funding transactions suggest that South West businesses are not taking advantage of this source of finance, this is despite the fact that debt funders are highlighting cautious optimism around the availability of funding and the outlook for business in the South West. This is a matter that the professionals in the region need to address to ensure that the South West continues to grow and stay competitive.”
Andy went on to say:
“Looking ahead, the myriad of data and contrasting influences (UK, European and increasingly global) means that it is hard to predict the outcome for 2019. The continued availability of such a wide range of funding with an increased threat of political and capital tax changes and the ability to appropriately structure transactions will underpin a reasonable level of deal volumes.
“However, there may well be more divergence for different companies – with those whose business model is more at risk or do not provide a strategic opportunity to others being far harder to fund or sell to trade, whereas others will still be able to complete and command high multiples. Overall it will need more than a ‘Brexit bounce’ to maintain deal volumes at last year’s numbers with a risk of negativity driving volumes down to levels not seen for five years or more.”
For a more in-depth look at the figures, click here to read the 2018 South West Corporate Finance Review (link to PDF).
Note to Journalists:
Picture caption: Andy Killick, Head of Corporate Finance at PKF Francis Clark
For media enquiries, please contact Claire Wright, Head of Communications 01392 667000
About PKF Francis Clark
Celebrating its Centenary year, Chartered accountants and business advisers PKF Francis Clark has an annual revenue of £45 million, a team of more than 700 people and 55 partners. The firm has seven offices across Cornwall, Devon, Dorset, Somerset and Wiltshire. PKF Francis Clark is a member of PKF UKI which is ranked 11th in the Accountancy Age 2017 survey of top accountancy firms and the fastest growing in the Top 20.
The award winning Corporate Finance Team comprises 21 senior dealmakers and supporting staff from a range of financial backgrounds in industry, banking and equity. The team have completed over 660 transactions with a value of over £2.6bn and a success rate of over 95%. As part of the service the team also offers integrated tax advice and financial planning, giving clients the best support in managing their investments and retirement, post transaction.