Looking back: Deals and Business Consulting in 2021

295 transactions

295 transactions

>£10bn total deal value

>£10bn total deal value

200 people promoted

200 people promoted

170 new hires

170 new hires

What to expect in Deals and Business Consulting in 2022

Whether you’re calling it 2022 or Year Three, the business world is in a much stronger position than in 2020 when COVID-19 first caught it unaware. Today, we have much clearer visibility on the challenges and opportunities that lie ahead, from navigating rising material costs to determining post-pandemic valuations.

To make sense of these, we asked each of the expert teams that comprise Grant Thornton Deals and Business Consulting to outline the trends that will transform Corporate UK in 2022.

Click below to discover why People and Planet will join Pandemic at the top of business leaders’ minds. We also reveal the key deal drivers of 2022; which sectors are set to prosper; and why, this year, company directors need a laser-sharp focus on reporting.

 

120x120-darren-bear.png"We have just come off a record 12 months for our Deals and Business Consulting team, global liquidity remains high and strong corporate balance sheets are driving significant levels of activity across all sectors. The environment that we operate in will continue to change, increasing inflation and challenging global supply chains will cause different challenges across many markets, we have a market leading team ready to help our clients grasp opportunities and navigate business change."
Darren Bear, Head of Deals and Business Consulting

1 The war for talent will define success

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“It’s time to look beyond reward to attract the best talent.”  
Alan Dale, Head of Business Consulting

 

In 2021, the number of UK job vacancies hit a record high of almost 1.25 million, according to the ONS – a trend that was mirrored in the EU.   This translated into raw material shortages, bare shelves, and empty petrol pumps. The UK workforce shortage is caused by an ageing population, a declining number of EU-born workers and high demand for key skills across key sectors and roles. These complexities are unlikely to be resolved in 2022, meaning the following:

  • The war for talent will challenge many organisations and competition will continue to drive wage inflation and skills shortages.
  • Organisations will have to think beyond financial rewards to attract the best staff and will need to focus on the wider Employee Value Proposition, i.e. why will people want to work for us.
  • Employees are increasingly choosing their next role based on an organisation’s ESG credentials and approach to Diversity and Inclusion – those companies that lead the way in these areas will find it easier to recruit and retain key people (see below).
  • There will be a continued surge in deal volumes for human capital businesses involved in skills, training, and apprenticeships as a result of buoyant market conditions.
  • Related supply chain blockages will continue to drive up raw material prices. Alongside other factors, this will contribute to rising inflation which the Bank of England expects to peak at 5% this spring.
2 ESG will become business-critical

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“Ambitious, real and practical plans to deliver ESG will go a long way to determining how organisations perform.”

Tomas Freyman, Partner, Head of Valuations

 

2022 may well be the year in which Environmental, Social and Governance (ESG), once a nice to have, becomes a commercial imperative for organisations. 2021, laid the foundations for this with the launch of several ESG-focused private equity funds and increased scrutiny, both of and by lenders in terms of where they allocate their capital.

From April 2022, the UK Government will put what is essentially goodwill into legislation by making it mandatory for Britain’s largest businesses to disclose climate-related information in line with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. This will be an increasing feature of covenants, causing greater complexity for corporate reporting.

Meanwhile, strong ESG credentials will become a must-have for companies wanting to win the war for talent. This is particularly true of the ‘S’ side of things, with Diversity and Inclusion shown to attract and retain talent.

3 Regulation will force companies to scrutinise their books

120x120-giles-mullins.png“In 2022, forward-looking company directors will ensure that their organisations are ready for increased scrutiny as a result of a new audit regulator.”

Giles Mullins, UK Head of Financial Accounting Advisory Services

 

In March 2021, the UK government launched a consultation to modernise the country’s audit and corporate governance regime. Its proposals include the creation of a new audit regulator, which aims to increase quality, standards and choice for businesses. In practice, this will result in more thorough scrutiny of corporate reporting of all UK companies. In 2022, company directors must ensure that their organisations are ready for this.

4 Three favourable conditions will drive deals, consolidation, and IPOs

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"This year we expect a red-hot deals environment as corporates refine their post-pandemic strategies.”

Keely Woodley, Head of Corporate Finance Advisory

 

2021 saw a record number of transactions and the return of IPOs for our Deals Business and Consulting divisions. We advised on 295 deals, valued at over £10bn. We expect momentum to continue in 2022, driven by these three factors:

Record amounts of private equity funding

Private equity has a record $2.3 trillion dry powder cash reserves, according to S&P Global. This wall of money will continue to chase assets that have been resilient through the 2020-21 lockdowns, allowing successful entrepreneurs to secure strong valuations.

Increased certainty

2022 will be a year of less (relative) uncertainty with companies having largely adjusted to life and trading conditions during the pandemic. The challenges ahead are largely known, including Covid, supply chain, workforce shortages, inflation, ESG, and post-Brexit adjustments. Amid these, corporate UK will turn its attention to how best to drive value. This will lead to:

  • Further consolidation and M&A activity – creating resilient foundations for growth and business performance will drive organisations to increase investment in technology, automation, leadership capabilities, supply chain and operating model optimisation.
  • Capital raising to support investment and strategic goals.
  • A focus on core offerings, resulting in carve-outs of non-essential divisions.
  • Continuing overseas activity as funders remain keen to invest in UK business and UK corporates seek to diversify their risk by acquiring strategic overseas targets.

Timeline for Capital Gains Tax review

HM Treasury has indicated that Capital Gains Tax will not be substantially reviewed until the next parliament. This gives founder-led and privately-owned corporates a longer runway to benefit from the existing tax regime, which is likely to support the existing flurry of M&A activity well into 2022 and beyond.

5 Healthcare, Tech, E-commerce, and Human Capital will continue to reign

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“Dealmakers are thirsty for businesses that can sustain growth through disruption.”
Mo Merali, Head of Transaction Services and Private Equity

 

Healthcare, technology, and e-commerce were busy sectors for our deals advisory business in 2021 as COVID-19 drove the need for private provision of healthcare, the acceleration of digital transformation and the migration of consumer business to the web channel (see our case studies below). The huge scramble for talent has also seen a spike in deal volumes in human capital businesses involved in skills, training, and apprenticeships. These sectors will remain hotspots in 2022, requiring new capital and access to liquidity to invest, develop and grow.

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“Restructuring activity has been at an all-time low, but there is potential in some sectors for more business failures and restructuring as government support measures fall away."
Shaun O’Callaghan, Partner, Head of Restructuring and Debt Advisory

While the above sectors have proven resilient during the pandemic, others are more challenged and will need help refinancing or restructuring their financial arrangements in order to survive. The gradual removal of government lifelines will mean Covid-impacted sectors like travel and leisure are likely to seek funding to repair balance sheets.

How we helped healthcare and tech businesses in 2021

We're an award winning team

  • We're an award winning team

    ACQ5 UK Restructuring and Turnaround Firm of the Year

    UK Pension Awards 2021: Sponsor Covenant/IRM Advisor of the Year

    Private equity awards finalist for the Commercial Due Diligence Provider of the Year

    Private equity awards finalist for the UK Corporate Finance House of the Year

    Finalist for the Laing Buisson Financial Advisory Award 2021

Stay ahead of the trends

Our interdisciplinary Deals and Business consulting team is here to help you best leverage the above trends for a successful 2022 and beyond. Uncover our services: