What does 2018 hold for the corporate deals market?
MHA Moore and Smalley corporate finance director, Stephen Gregson, gives his thoughts on the year ahead in our latest Q&A?
How do you expect the corporate deals market to perform in 2018 vs 2017?
For us, 2017 was a very busy year where we advised on corporate deals worth in excess of £25m.
Uncertainties surrounding Brexit will remain – but 2018 should see the implications for businesses becoming clearer. Whatever happens across the wider economy, businesses and their owners will still move towards transition points, be that owners wanting to retire or a business becoming part of something bigger.
What external factors will affect the M&A market in 2018?
One word might seem the answer – Brexit. But really it is about how businesses choose to react to the uncertainties continually thrown up by life. Looking further afield, geo-political factors could also impact, potentially significant. I am thinking here of tension in the Far East and the continual rise of China to a position of global primacy. That is a longer-term trend, but the chafing which might arise in its relations with the USA, in particular, could have ripple effects which lap up on our shores.
Do you think the Brexit threat is exaggerated?
Because the Brexit question takes us into utterly uncharted waters we simply don’t know. Perhaps all we can sensibly say is that as with any fundamental change of a status quo, the potential downsides are usually more readily identifiable than possible upsides. My own view is that it will likely not be as bad or as good as both extremes claim.
It is a threat, of course, but the sun will still come up. Businesses will either manage, flourish or fail in the post Brexit world, as they always have done with any threats. ‘Prepare for the worst and hope for the best’ is perhaps the most sensible thing one can say.
What does the current funding landscape look like for the year ahead?
Interest rates may start creeping upwards if further base rate rises occur. The recent comments coming out of the Bank of England suggest we may see more rises in 2018. But the Bank will be mindful of not choking off the economy which, despite low (by recent standards) unemployment figures, still strikes many as fragile.
Are deals being done in a different way now to the way there where a few years ago? If so, why is this?
Yes and no. Certain deals (MBOs for instance) are seeing greater use of deferred consideration, where part of the purchase price is payable at some future date. But these structures look less unusual if you take the long view to the late 1990s and early 2000s.
What’s your advice to those looking to do deals in 2018?
There will be many opportunities, so keep an open mind and be alive to them.
If you are thinking of selling then ask yourself why this is. What is it that you are trying to achieve by selling the business? Is it a sum of money? Or is freeing up your time more important?
Depending upon your ultimate goal it may be possible to achieve this in another way and yet still retain ownership of the business.
To those who are considering acquisitions, getting your funding in place beforehand will give you certainty, flexibility and the ability to act quickly.