After prolonged periods of uncertainty, businesses can refocus on key investment decisions knowing that there is a Brexit deal agreed with the EU (Withdrawal Agreement) giving them a clearer picture of the potential outlook for the UK economy
Although a trading agreement with the EU post Brexit has not yet been concluded, the certainty of Brexit occurring at least provides businesses with some clarity for planning purposes.
After the recent general election, a majority government was formed which also gives businesses more clarity in terms of the direction of economic policies. This has restored some confidence across the business community and for businesses in the infrastructure sectors such as water, utility and rail companies, such as Deutsche Bahn (owners of UK transport company Arriva) which could have potentially been taken into public ownership under a Labour government. Arriva plans to undertake a listing of the business in 2020 now there is a more stable policy outlook. 2019 saw a poorer year for UK public markets with companies only raising $8.5bn from 30 company listings, down from $11bn from 69 in 2018. More businesses left the main market of the London Stock Exchange in 2019 than joined resulting in a net contraction. 2020, however, is shaping up to be a better year. In December 2019, UK-based companies announced a flurry of deal-related announcements, including Cineworld, the movietheatre chain, agreeing to buy Cineplex of Canada for $2.1bn evidencing renewed confidence from investors. This is in contrast to the previous two and a half years, which saw some businesses scale back their investment and growth plans, whilst shareholders were more reluctant to consider exit planning due to the fear of value deterioration. Since the prospect of a Corbyn led government has receded, bankers and other dealmakers are now hoping that a new degree of political certainty could revive the IPO market and trigger a wave of mergers and acquisitions.
Despite the general trend of deal volumes being lower during this period of instability, private equity markets have remained robust and active with trends dictated by the numbers of sellers rather than appetite to invest. As we have reported on there is a huge supply of equity in the markets making this a great time to consider private equity as an option. Cavu Corporate Finance has had a buoyant period, advising on a number of highprofile deals including advising Fastflow on the merger with United Living creating a £400m turnover combined business on acquisition; advising the shareholders of Pacifica on the significant development capital investment from Synova; advising Infinity Works on an investment from Growth Capital Partners; and advising Avid on the investment from Maven and existing shareholders NVM and Downing.
Things are also looking up for sterling with the GBP having been on a downward trend against most currencies for many months. This stabilization in GBP is important for business planning both in terms of certainty around input prices and sales prices. Volatility in these markets has hampered business planning, investment decisions and M&A. Volatility in FX has reduced somewhat as discussions on hard/soft Brexit and political manoeuvring have receded, at least for now.
Following the result of the election in December, we have seen an increase in regional businesses and shareholders wishing to re look at investment and growth plans, M&A and review of exit options and we look forward to a more stable backdrop in 2020 and working with exceptional businesses to assist in delivering their objectives.