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South West Deals Analysis & PKF Francis Clark Deals Review 2020

Welcome to the 2020 South West Deals Review which provides an analysis of transactions in the region over the last year. The publication also reviews a selection of PKF Francis Clark transactions, and covers a range of more in-depth articles on EOT, financial planning and proposed tax changes in the year ahead.

2020 was a true ‘rollercoaster’ of a year for transactions. Despite how it felt, the impact of Covid-19 on the transaction market-place was comparatively very short, lasting only a matter of a few months before activity picked up in September, with transactions that had been put on hold and new ones starting. However, deal volumes in the region still fell by 14% following a trend reflected in the overall UK figures with a similar fall of 13%.

The fundamental difference to other downturns was money – masses of it, from multiple sources. Traditional debt had been recapitalised over the last decade which strengthened balances sheets in an impressive way, driven by Regulators since the financial crisis. AltFi had emerged, prepared to take on higher risk for a higher return and the volumes of lending was starting to become significant, and finally, equity – never had there been so much available. In addition, Governments around the globe took unprecedented steps to minimise the financial impact on businesses and their populations with a myriad of support mechanisms.

Ultra-low interest rates (from a historical perspective) had the combined effect of enabling companies to sustain substantial levels of debt (additionally supported by Government schemes pushing the effective rate even lower, or to nil) as well as driving investors to seek higher risk assets to try and generate some form of return, as cash deposit rates delivered real-rate losses.

The PKF Francis Clark Corporate Finance team have experienced very high activity levels this year supporting businesses in getting their transactions over the line before the budget on 3 March. This has in part been largely driven by concerns regarding potential increases in Capital Gains Tax rates, which ultimately did not materialise. Beyond that, business fundamentals will play a more significant part as the divergence between those sectors suffering significant temporary or even permanent damage and highly performing ones will continue. We anticipate this to include the delayed refinancing following the much welcomed government support, announced in the recent Budget, for businesses until September.

If you would like to speak with us about any possible transactions, please get in touch with claire.vis-bulmer@pkf-francisclark.co.uk

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