Following an event in Edinburgh which celebrated the launch of ICAS’ Who’s Who in Corporate Finance, Brewin Dolphin London hosted 20 corporate financiers at an event launching the 2018 directory and delivering the results from ICAS’ corporate finance survey. In keeping with the Scottish theme and the fact the event was hosted on Burns Night, the tradition of addressing the Haggis was honoured in style.
The results from the survey involving dozens of firms were announced with the news that corporate financiers are expecting to be busier this year with deals than they were in 2018. The optimism expressed by the dealmakers and advisers is despite the many potential factors that could have a negative effect on the corporate finance market, with a hard Brexit at the top of the list of perceived risks.
The survey was based on responses from just over 50 senior individuals in corporate finance, including accountants, lawyers, bankers, private equity specialists and advisers. Half of respondents (50%) expected to be busier this year (12% expected to be less busy and 38% “about the same”).
The survey respondents stressed the importance of preparation, managing expectations and advisers from different disciplines working together. This includes wealth management advisers, who can help vendors to understand what capital they will need in order to meet their needs and aspirations with 60% of respondents wanting Wealth Managers to join the company exit process as early as possible.
GROWTH AREAS AND RISKS
The five sectors expected to generate the most deal activity are:
- Airlines and aerospace
- Healthcare and pharmaceuticals
- Telecoms, technology, Internet and electronics
- Financial services
- Utilities, energy and extraction
The perceived risks with the greatest potential to impact the market negatively are:
- Failure to agree Britain’s access to the Single European Market, post-Brexit.
- A downturn in the US economy.
- A snap election/change of UK government.
- Increase in the Bank of England base lending ate over and above a rise of 1%.
- Significant movement (either way) in the sterling exchange rate.
WHY DEALS FAIL
As a wealth management advice provider, Brewin Dolphin is looking to work in conjunction with accountants to help get corporate finance deals “over the line”.
ICAS asked the corporate finance experts in its poll to rank the reasons why M&A deals fail to complete. The top five were, in descending order:
- Change in purchaser sentiment
- Misunderstanding of risk
- Change in vendor sentiment
- Information asymmetry
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