Emerging corporate finance trends in the North West

By Sarah Lawless, The PHA Group

On Thursday 15^th February Pro Manchester as they welcomed 450 delegates for their annual Corporate Finance Lunch at the Midland Hotel.

The event, headline sponsored by Together, and held in association with Experian, saw a panel of experts from the corporate finance world review the last twelve months of deals in the North West, and predict some of the key trends in the sector for the year ahead.

Michael Berger, Head of Corporate Finance and M&A at Together hosted the following panellists to discuss the topic:

• Michelle Heptinstall, Director at Thincats
• Jodi Birkett, Partner at Deloitte in transaction services team
• Lucie Mills, Partner at Northedge
• Andrew Feeke, Founding Partner at MHA Moore and Smalley
• Erin Berry, Director Corporate Finance at Saffrey

The North West and Manchester Annual Corporate Finance Review 2023 provided a springboard for the event and discussions, showcasing a buoyant backdrop for deals in the North West region. The analysis shows that while the tricky economic climate saw deal volumes downturn in 2023, deal values surged by more than 110% year on year.

Trends in 2023

Looking back on 2023, the panel discussed a range of trends in the market and agreed that businesses in the heath and tech sectors have been the key area of focus for investment and acquisition over the last twelve months.

All agreed that there has been a general shift away from quantity of deals to fewer, higher quality deals in the market over the last year too. With this has come a slowdown in the time taken to complete a deal and with more cautious buyers, Mills emphasised that preparedness for sale has become more important than ever before.

Heptinstall spoke of the importance of examining a business in detail, even in a sector that not everyone would look at. She cited the benefits Thincats had seen from taking a more bespoke approach and thinking beyond blacklists to look at things through a commercial lens.

Finally, the panellists touched on a prevailing gap between the desired valuation of sellers and the value buyers are willing to pay. Feeke argued this was in part down to the fallout from the multiples seen in 21/22 and stressed that the onus lies with advisors to educate the client as to what is a fair and appropriate valuation.

Predictions for the industry over the next 12 months

A diversification of sectors

Looking ahead, all panellists agreed that the start of 2024 feels more optimistic than start of 2023, with greater stability in the market and a more diverse portfolio of business attracting investment.

Whereas companies in the health and technology sectors have been the gold standard in recent years, many of the panellists reported a broadening of the kind of businesses they expected would be attracting investment in 2024 and beyond.

Many panellists mentioned increasing interest in businesses in more historically popular sectors, such as manufacturing, travel and business services peaking interest in the year ahead.

Tech and AI

Berger noted that the integration of tech and AI is not just a trend, it’s a full transformation. AI has already been commonly employed to make due diligence and transaction services more streamlined. However, it is playing an increasingly prevalent role across the corporate finance sector and can now be used to help with many areas, including identifying acquisition targets.

Birkett noted that in the next 5 years, 50 per cent of activities we do will be touched by generative AI and 300 million jobs globally will be impacted by this. She mentioned the ways in which Deloitte is already utilising AI through its own inhouse software but added that the human overlay is still essential for them. While AI and tech advancements will allow us to be more insightful about the data we are bringing into a deal, Birkett was confident that the human element of roles in this sector aren’t replaceable in the short or medium term.

Sustainability and ESG

The Review cites a significant shift towards businesses prioritising ESG and sustainability and this is a trend the panellist agreed is only going to grow in the year ahead.

Mills explained how she takes a commercial approach to ESG and sees it as a huge opportunity. She explained it will continue to help communicate the resilience and future-proof nature of a business, while also helping to generate market demand and to secure a swift transaction.

Feeke discussed MHA’s own journey to B-Corp certification and the benefits he believes this will yield from the perspective of clients, staff and the communities in which they operate. He said other companies will no doubt follow suit as these issues are increasingly important to all parts of the deal chain.

Improving diversity in the industry

Diversification of the industry went far beyond business sectors, and seemed to be a key trend when it came to establishing a more diverse workforce and a more inclusive top table.

Berry spoke of her own career path and the support she had received from female-first organisations such as the 6% club and Rebecca Rennison’s Macho movement that were helping to change the game in the corporate finance sector. However, all agreed there was far more that needed to be done.

The event was rounded off by a thought-provoking speech from keynote speaker Sharon Amesu. Sharon challenged the room to think about the business benefits a more diverse senior leadership team can bring, citing fascinating research from McKinsey which revealed that organisations can improve profitability by up to 39% by increasing diversity at the top. Sharon implored all attendees to consider the active role they could play as allies to make meaningful changes in the sector. This is certainly one area we hope will become a key focus in 2024 and far beyond.

Original source: https://thephagroup.com/blog/emerging-corporate-finance-trends-north-west/