Corporate deal round-up H1 2024
We set sail amidst choppy waters in the first half of 2024, with impending elections both side of the pond, continued economic uncertainty in the UK and me making some injudicious predictions for the year ahead (including, most depressingly, an England win at the Euros). As we reach the midpoint of the year, I wanted to take this opportunity to reflect on what we’re seeing in the market and provide some commentary on the outlook for the second half of the year.
Our top-ranked Corporate group has been industriously navigating an increasingly turbulent environment, and I'm pleased to spotlight a few notable deals from the past six months (do click here for the deal sheet for more extensive list of our transactions).
The long-awaited and much talked about green shoots in global M&A activity – volumes growing by 17% $1.6 trillion - have been felt throughout the market, with increased investment in rapidly growing sectors such as scalable technology and AI. Our roles for the management sellers of Membr, a premium club management software solution, on its sale to Xplor Technologies and long-standing client Advania, one of Microsoft’s leading partners in the UK, on the acquisition of Servium, an IT managed services provider, were one of several such deals we worked on in this period.
We also witnessed the continued appetite of US-headquartered corporates, benefitting from a strong US dollar and cautious valuations, to acquire UK companies, advising US-based accounting firm CliftonLarsenAllen on the acquisition of Engine B, a data solutions platform for professional services.
We also picked up instructions that bucked this trend, acting as UK counsel for Hibbett, Inc, a US-based athletic fashion retailer, on its proposed $1 billion acquisition by JD Sports Fashion Plc, Britain’s biggest sports retailer. Other deals with an international flavour included acting for a specialist impact investor, on its equity investment in East African agri-business platform, Agris, further cementing our commitment to our burgeoning African client base.
The sport sector also continued to be a hotbed of activity, and our involvement in the acquisition of Wycombe Wanderers Football Club underscores the increasing interest in sports assets particularly from private investors. With five other football club transactions under our belt in the past year, we're eagerly watching this space to see how this trend evolves. Other transactions with a private capital slant included advising Entrepreneurial (itself the vehicle of a well-known US businessman) on the sale of two food production businesses to The Compleat Food Group; a testament to our expertise in this domain.
Finally, our Equity Capital Markets team saw a number of the Firm’s clients seek to access injections of capital, with our team orchestrating three secondary fundraises across diverse markets (Main Market, AIM, and AQSE) within a single month.
These deals, alongside numerous others we have worked on, are evidence of the continued resilience of the transactional market in the face of economic and geopolitical volatility and the desire of clients to continue to access capital and put into place ambitious growth plans.
Turning then to the second half of the year, it is impossible not to predict that the change of government here in the UK will have an effect on deal flow (for a deeper dive into what a Labour government might mean for UK business see my colleague Caroline Carter’s excellent piece here).
Labour's landslide victory could herald a new era of stability and certainty in UK policy, a welcome change after the Brexit saga and a revolving door of Conservative leaders. Entrepreneurs are starting to view Labour as the 'party of business', and the UK market is emerging as a beacon of stability in contrast to the political whirlwinds abroad. With a more predictable policy environment, we anticipate a surge in market confidence and long-term investment decisions, all hinging on the autumn Budget.
That being said, the question of capital gains tax looms large. Labour has pledged to shield income tax, VAT, and national insurance from hikes, which raises the question of how they'll fund any uptick in public spending. Capital gains tax seems a likely target, despite the Chancellor's assurances to the contrary. Any increase would likely be announced with minimal lead time to prevent a flurry of pre-emptive sales, with a mid-September Budget as the earliest possible date. Should capital gains tax rise, we expect a short-lived spike in transactions as sellers rush to beat the hike, followed by a slump as the higher rates bite. The proposed closure of the 'carried interest' tax loophole may also cool the ardour of US private-equity firms for UK deals, potentially leading them to seek more favourable climes for their transactions.
Labour's commitment to bolster private sector investment, particularly in energy transition, infrastructure and housing, is clear. They aim to enhance the existing Trade and Cooperation Agreement with the EU and attract global private investment, with initiatives like Great British Energy and the newly launched National Wealth Fund. The latter seeks to leverage public capital with private investment, and while investor interest is anticipated, the accessibility of the scheme for businesses remains to be seen.
With inflation and interest rates both expected to further decrease in the second half of this year, the mood music for transactional activity feels markedly more positive than it did at this point last year. While there will certainly be other bumps in the road between now and the end of the year – not least in the small matter of the US election – the resilience of the mid-market over the last 18 months can only serve to generate confidence as conditions improve. Until then I’ll spare you any other ill-judged sporting predictions for the coming six months …
