What’s in store for the deals market in the South?

Published by

Steve Banbury

Pictured above: Paul Stout, Corporate Finance Partner at PKF Francis Clark

What impact is the current political turmoil likely to have on the deals market in Hampshire? According to a corporate finance expert from PKF Francis Clark, although businesses are increasing their levels of due diligence, deals are still crossing the line.

After coming through the challenges of the Covid-19 pandemic, supply chain issues, rising energy costs and the impact of the war in Ukraine, businesses have had their fair share of upheaval and uncertainty. But the scale of political turmoil wrought by the tax cuts in the ‘mini-budget’ going further and faster than expected, followed by the subsequent u-turns has had us all on the edge of our seats.

“It can be easy to get swept up by the headlines and fear the worst when things are uncertain politically, but the reassuring news is that on the ground corporate transactions are still completing”
Paul Stout

As one of the largest independent firms of chartered accountants and business advisers in the South, PKF Francis Clark is in a good position to assess market confidence.

Despite disruption to many sectors of the economy during the Covid pandemic, the transactional market reached its peak in 2021. This mirrored the experience at PKF Francis Clark, which completed 139 deals last year.

“Of course, we’ve had downturns and recessions before, but the difference this time has been the availability of money,” adds Paul Stout. “Equity and alternative finance are much more abundant. Coupled with that, there has been a need for investors to take risks to generate returns. The appetite for buying businesses remains high.”

This volume of funding in the system may help to shield the transactional market from wider economic threats.

The uncertainty of the last few years has brought changes, particularly an increased focus on due diligence. “We are undertaking far more vendor due diligence to help business owners be better prepared to sell, maximise the consideration and achieve completion in a sensible timeframe,” explains Paul Stout.

Stout also points out that environmental, social and governance (ESG) factors will continue to be important. “We may not have seen ESG affecting profits and multiples significantly yet, but I have no doubt that the potential impact on exit values will increasingly benefit businesses which have embraced this agenda.”

What advice does PKF Francis Clark have for business owners who are thinking about buying or selling? “Selling or buying a business can be an incredibly stressful and emotional time, but I would urge business owners not to get too distracted by media analysis and market turbulence. What we are seeing on the ground in the South, and indeed across the UK,

is that deals are still going through and there continues to be an appetite for buying businesses from private equity and overseas buyers in particular.”

With 54 partners, over 850 members of staff and annual revenue of £52 million, PKF Francis Clark is a member of the PKF International network of legally independent accountancy firms, which has more than 220 members in 150 countries.