In the first of this three part series, financial journalist James Ashton talks with Adrian Howells, a director in our corporate finance team about the current market for business deals as we slowly emerge from the pandemic.
The video and a transcript of the interview can be viewed below.
The deals market: what does it look like now?
James Ashton – So, Adrian how's the market for business deals right now?
Adrian Howells - It has been and remains very busy. At Quantuma, and also speaking with my peers at other advisory firms and those in the Private Equity industry, we're all very busy at the moment. The last 12 months have been a challenge, whereby as the pandemic sort hit initially, most of the deals that were on for us and for others came to a bit of a natural pause as people tried to work out what this meant, and confidence vanished from the market, but actually as the market got used to lock down and actually the economy plodding along in a way, most deals that we were working on, and indeed, I believe is the same for our peers, ultimately got completed. I would say something like 75% of the deals that we were working on the beginning of the pandemic, we ultimately completed. The key difference being that things were much slower as buyers were more circumspect in terms of where they were placing their money under such an uncertain environment.
James Ashton - And it sounds like those trends surprise you?
Adrian Howells - You're right, it is a surprise. I think one would anticipate, if you were looking at this from the outside, that the deal-doing community would be quite quiet at the moment and actually this isn't the case. There was a rush, if you will before the budget this year where there were expected to be Capital Gains Tax changes, and like many of our peers, at Quantuma we were extremely busy. We completed eight deals - the total value of £130 million in a two-week period in the run-up to the budget. Post-budget then, one would again anticipate a lull and that has not materialized either. So, we continue to be extremely busy.
James Ashton - So, given where we are today, how do you see the rest of the year panning out?
Adrian Howells - As lockdown starts to end and there's some form of return to normality within the wider world, I think that there's also a lot of pent-up demand from owners - those that were thinking of doing a deal last year and weren't able to for whatever reason, coming back to the market and sort of getting on with trying to do deals. I think a lot of the answer comes through certain sectors wishing to consolidate as well, so that they're sort of stronger moving forward, and so that feed into the rest of the year and our pipeline is pretty solid for the rest of the year, and we don't anticipate that changing for a time to come.
James Ashton - And can you put a bit of colour on that? What's happening by sector or by region?
Adrian Howells - Regionally, we're starting to see a similar sort of breakdown as pre-pandemic, so it's still the case that London is the busiest, followed by the South-east, and then you move the Midlands industrial heartlands, and the West Country and it's similar ratios as before. Sector-wise it's quite varied to be honest. There's a lot of interest in sectors that have done well during the pandemic such as tech of course, healthcare and logistics, but also, we're starting to see manufacturing deals more frequently. I think these play in particularly well with the government's potential levelling up agenda as sort of manufacturing comes more to the fore, and there is interest from different buyers in terms of how well businesses have performed - as long as it's not because of the pandemic...generally buyers are interested.
James Ashton – So, it's interesting the pandemic winners as you describe them, are still appealing to buyers and sellers who are looking to capitalize on those valuations?
Adrian Howells - That's absolutely right, yes. Generally buyers - those that are being more sensible perhaps, are taking a view that they want to invest in businesses that have done well during the pandemic, but not done well because of the pandemic, if I could make that differentiation. Albeit, speaking to contacts in Private Equity only last week in fact, it's clear that slowly some buyers are starting to buy the businesses that have just simply had a good pandemic, and there's a few question marks around that in terms of sustainability of values and so on, and so forth, if those sorts of businesses are over sold.
James Ashton - Adrian, can you talk a little bit about the mechanics of a deal? You've been doing this for 10 years now, so buyer meets seller - what are the other ingredients you need to get a deal over the line?
Adrian Howells - For me, I think one of the key ingredients that we can add is about relationships. It's those soft skills. We need to be in the detail. We need to understand the minutiae of the deal but actually building a rapport with all parties because there's all manner of parties involved; it's buyer, it's seller it's the respective advisors respective lawyers. There might be a bank involved, there's diligence providers involved - you've got to corral all of these parties together around a transaction to simply make it happen. But also, whilst being in the detail with the numbers, one can often achieve a bit of a win for the client which can pay for my own fee several times over, and of course that's an easy conversation to have.
James Ashton - Adrian, thank you very much.
Adrian Howells - Thank you.
Originally Published 29 June 2021
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