Mishcon de Reya
Growth – back on the agenda?
Partner and Head of Corporate
Is growth back?
Market conditions are improving. We are seeing a lot of MNA activity, if we are not at 2005 – 2006 levels we are certainly approaching those levels.
Right now economic conditions are favourable, we have a low interest rate environment, capital gains tax on any sale, in particular, it can be 10%. Whether that changes next year with the election we will have to see. If interest rates do go up, go up quite substantially if the capital gains, the entrepreneurs relief under the capital gains tax is changed, then I don’t know whether it will still be as favourable.
I am not sure that we will see an explosive growth for the next year I think the elections may affect growth. I think after the elections and if we are in a favourable market, then yes, I think we will see that explosive growth. We will see new entrants to the market as we always do and an improving market, driven by the mid-market can have very explosive growth.
The market has changed in that we are seeing very little bank funding deals. Pre-2008 there was a lot of leverage deals, they are just not there now, certainly not in the mid-market. We are seeing new entrants into the markets so we see foreign investors, high net worth, business owners, a lot of activity in the mid-market. PE Houses are also becoming very dominant in all the deals that we are doing but the banks are just not there. So I think that’s the biggest change.
Has the way deals get done changed?
The market right now is a little bit more cautious so deals take a little bit longer to complete than they have done pre-2008/2009. We see a lot more due diligence being undertaken by buyers, so in that respect, the market has slightly changed.
Sector specific growth?
We do not see any particular sector driving the market. We see a lot of real estate driven corporate deals but they are just one of the sectors that are particularly active right now. Betting and gaming, mining natural resources, recruitment, manufacturing even I mean years ago we didn’t see a lot of manufacturing deals, we have a few deals on now, UK manufacturing businesses being sold. So actually it is all sectors that are driving the market right now.
What is driving the UK economy?
In our view, the mid-market is driving the UK economy and the mid-market constitutes young, dynamic entrepreneurial business owners and sources of wealth and hopefully that could change and will continue into the future.
Mishcon de Reya