Corporate Finance

2023: Spring update

 

Welcome to the FRP Corporate Finance Spring update. You’ll discover more about our latest activity including the most recent deals and updates from our team – as well as an overview of the current market conditions and what we might expect to see in 2023 and beyond.

We start with some good news, having recently been named ‘UK Corporate Finance House of the Year’ at the Real Deals Private Equity awards 2023. The finalists in the category included some of the UK’s most prominent advisory firms, with FRP Corporate Finance announced as the winner, following a standout period of growth last year and in recognition of the quantity and quality of private equity transactions completed by the team. The judges recognised the firm’s hard work to get complex deals done and for having a great team to work with.

This year we have welcomed new joiners across our M&A, Debt advisory and Research teams, and have recently announced a raft of promotions across the business to further strengthen our corporate finance teams across the country.

In May we attended the AICA Global meeting in Dublin, where we were joined by 80+ delegates from across our international network to discuss M&A, collaborate and share best practice ideas. The conference culminated with FRP Corporate Finance being named 'most invaluable partner in 2022', and Simon Davies, being named 'most valuable player of 2022', following an exceptional year of cross-border transactions. Simon has subsequently been appointed as Chairman of the AICA Board of Directors.

M&A update

From heightened political uncertainty to rising inflation and interest rates – the pressures of the current climate have presented considerable challenges to the UK M&A market. A recent report by Refinitiv* highlighted that UK M&A activity was down 60% by value in the first quarter of this year – with deal activity levels at the lowest Q1 total since 2013, and the lowest of any quarter since 2016.  Part of this decline can be attributed to the knock-on effect of the uncertainty caused for the M&A market immediately following the UK mini-budget in September 2022.

But whilst current market conditions appear to have impacted larger deals in the upper-mid market and beyond, our experience at FRP Corporate Finance is that M&A levels in the lower-mid market, in which we operate, appear more robust. In Q1 our team closed seventeen transactions, acting as sell side, buy side or debt adviser.

With 50 per cent of our deals in Q1 involving private equity firms – a similar level to 2022 – we are continuing to see steady levels of activity in this area. We expect a continued flight to quality within private equity, with firms being more discerning about where they deploy capital, and more focus on high-quality platform companies and buy and build strategies around existing investments.

We have seen a good mix of deals across sectors in Q1, with a significant number of completions in the UK manufacturing sector and a notable interest in professional services, particularly buy and build opportunities from private equity. In the wider market, technology transactions were unsurprisingly impacted in Q1 from any instability caused as a result of the closure of Silicon Valley Bank; however, we have still closed transactions in this sector and anticipate increasing levels of activity as funding confidence returns.

We move into the summer months with a healthy pipeline of deals, and a feeling of great pride in our team, following our recent award win at the Private Equity awards.

 

Matthew Flower

Matthew Flower, Partner - Corporate Finance

In the wider market we expect to see M&A activity in the UK begin to improve in the second half of the year with an expected fall in both inflation and interest rates – and with the prospect of a change in government and possible change to capital gains tax in the next couple of years, we remain poised to support businesses and their owners that may begin to consider transacting this year.

Recent M&A deals

Debt Market update

To combat surging inflation driven by the wholesale energy market and wider supply chain dislocations – which were arguably exacerbated by the market reaction to the Government’s ‘mini-budget’ in October 2022 – the Bank of England (BoE) has hiked interest rates to 4.5 per cent, representing the most accelerated rise in borrowing costs since 1989, with further rate rises a distinct possibility. As a result, borrowers are likely to face increasing scrutiny from lenders in assessing debt capacity in 2023.

In a previously low interest rate environment, the idea of rates approaching 5 per cent was viewed as cataclysmic for many, but the reality is that firms’ must continue executing on their growth strategy and delivering value for their clients in order to mitigate the increasing drag on underlying cashflows.

Nevertheless the BoE’s chief economist Huw Pill recently commented that the UK must also look to avoid an elongated inflation spiral driven by wage price inflation without a cut-back on discretionary spending. UK plc must accept the outlook is more challenging and focus on targeted investment to stimulate growth.

While credit markets may be harder to navigate, they will continue to offer an avenue for capital raising for many corporates and with this in mind, our team are on hand to advise of clients on how best to familiarise themselves with the current funding landscape.

Tom Cox, Partner - Debt Advisory

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Meet our new joiners

David Kola

David Kola

David Kola

  • Assistant Manager – Deal Origination
  • Corporate Finance
  • London
Olivia Norris

Olivia Norris

Olivia Norris

  • Senior Manager
  • Corporate Finance
  • London West End
Adrien Vendran

Adrien Vendran

Adrien Vendran

  • Executive
  • Corporate Finance
  • London
Amit Bagga

Amit Bagga

Amit Bagga

  • Senior Manager
  • Debt Advisory
  • London West End
Chad Price

Chad Price

Chad Price

  • Senior Manager
  • Debt Advisory
  • London West End
Pardeep Singh

Pardeep Singh

Pardeep Singh

  • Associate Director
  • Corporate Finance
  • Manchester