Review of corporate finance deals in 2016

Andy Morgan Andy Morgan

Our Leading the way brochure takes a look at the corporate finance deals we advised on in 2016 and our views on the industry for 2017.

Economic and political uncertainty has weighed on the overall level of deal activity in 2016. We have seen a notable slowdown in the number of completed deals in the second half of the year as the Brexit effect filtered through. The mid-market has proved the most resilient and whilst downside risks remain, we are cautiously optimistic about the level of deal activity in the coming year.

M&A outlook for 2017

In a world where topline growth remains hard to achieve, whether companies are investing or divesting, M&A is high on the corporate agenda. There is still a huge amount of liquidity in debt and equity markets that is looking to be deployed.

Corporate balance sheets are generally strong, however, there is an increasing laser focus on return on capital which we expect to see driving more non-core divestments in the coming year, as companies focus on their core activities and where they want to invest.

Volatility in capital markets has created a difficult environment for new issues and the IPO pipeline has been relatively thin. However, we believe that the attractiveness of UK assets, particularly for overseas buyers could underpin an increased level of public market deal activity in the coming 12 months.

The UK’s decision to leave the EU and the resulting marked depreciation of sterling is likely to have a positive impact on M&A activity. UK assets are more affordable for overseas buyers than they have been for some time.

The takeover of ARM Holdings by Japan’s SoftBank is a prime example, not only of this currency impact, but also of strong trade and financial buyer interest in the technology sector. We expect the robust level of deal activity in technology to continue in 2017, with the healthcare and consumer markets (despite downside risks to overall consumer spending) will likely to remain busy.

Capital availability in the UK

The pool of capital available is very large and includes a wide variety of different types of investor. Debt funds, family offices and other institutional investors are active alongside corporate and private equity operators.

The range of potential investors and their ability to take a flexible approach is leading to a more creative deployment of capital including joint ventures, partnerships and minority deals. Political and economic uncertainty is unlikely to lift any time soon, so a longer term view and a balanced approach to volatility and risk will be key to successful deal doing.

Valuations remain strong for the right businesses with strategic relevance or scale. Owners of good quality assets continue to have numerous financing alternatives, whether for growth capital or to release equity value from the business.

Our corporate finance team's performance

Against this backdrop, the Grant Thornton M&A team has enjoyed a very successful year, achieving a record level of transaction activity across a range of different sectors and deal structures. We have helped clients close 134 deals, with a cumulative deal value of £4.4 billion in 2016, making us one of the top corporate finance advisers in the UK.

The strength of our international network and corporate relationships saw us close £1 billion of deals with overseas buyers, with a further £1 billion involving Private Equity. We continue to invest in growing our M&A business and increasing market share. Focusing on the resilient mid-market, and drawing on our deep sector knowledge and extensive global network, we have helped our clients find innovative solutions to finance their growth and realise value.

We want to work with active, dynamic businesses and individuals who continue to driving the UK economy. If you are contemplating your strategic options for 2017 and beyond, we would be delighted to discuss this with you and share our thoughts.

Find out more about our Transaction services.