Corporate Finance Regional Overview for Wales
The headline statistics are a reduction in the number of deals in Wales by 6% in 2017 compared with 2016, and a reduction in the total value of transactions by 21% to £1.1bn. The significantly higher reduction in total value than volume may suggest that the recovery that we have been seeing in recent years following the recession has reached the SME market. Given the nature of the economy here in Wales, we do not consider this to be a bad thing on its own. Taken together with the strong performance in the final quarter and the fact that 2017 was only the 2nd year since 2009 that deal volumes had exceeded 200, the year looks more positive than the initial statistics suggest.
The largest number of deals by sector was recorded in the manufacturing sector with more than a quarter. This is not unexpected given the make up of the businesses in the region. The 2nd largest sector was wholesale and retail, followed by construction. However, the construction had the largest total deal value, including the largest 3 single deals, reflecting the continued increase in land and property values.
2017 saw another varied year for us, with a broad range of transactions across sectors and values.
In contrast to the overall market, the number of deals we advised on increased by 20% to 18. The total value of those deals was consistent with the year before, showing a reduction in the average value per deal of 17%, from £2.9m to £2.4m. As stated above, we feel this reflects the nature of the market in Wales and the progression of transactions to the smaller end of the market.
Whilst the deals were spread across sections including construction, waste management, motor and professional services, many had similar profiles of being strong, indigenous businesses. In addition to full deal management services, we have also provided strategic support to clients in relation to pre-acquisition financial due diligence, valuations for external investment and business planning for growth.
The transactions involved us acting for both vendor and acquirer in equal numbers and involved some well known brands in the region, including Amber Services, Clarks Modular Buildings, LDS Motor Factors and Wolfestone Translation.
Our corporate finance services also supported lenders in the region, including the newly launched Development Bank of Wales, with pre-lending financial due diligence for investment projects including that undertaken by Glenside Commercials Limited.
We have a strong pipeline of transactions coming through into 2018 and, as a result, can start to see trends and themes for the current year.
It looks like 2018 will continue to see the return of the Management Buy Out as a transaction structure, with banks recognising the importance of this to the succession of SMEs in Wales and increasing their appetite for cashflow lending.
There are also a number of support programmes available to new start and technology businesses including E-Spark and the Welsh Government funded Accelerated Growth Programme. Therefore we expect an increase in the number of equity investments by both high net worth individuals and specialist funds such as the Development Bank’s Technology funds and Inspire Wales.
Our experience is more positive than the overall statistics suggest and we expect the coming year to involve transactions across the sector, demonstrating the strength of the underlying SME market in Wales.
Our dedicated Corporate Finance team delivers commercial and proactive advice to clients in all sectors, primarily focused on SMEs. The team has been named the most active Corporate Finance advisory team in Wales for the last 3 years, reflecting the overall firm’s position in the market as a leading independent firm.