Despite business uncertainty, severe political instability and a number of sectors such as retail and energy facing continuing tough challenges, the deals market across Scotland does not appear to be taking much notice. As the UK started 2019 with nervous anticipation, the corporate deals market in Scotland shows little sign of slowing down.
In the last 12 months, our Corporate Finance team has been involved in over 123 corporate deals and, so far, the first quarter is looking strong. In 2018, the deals spanned a large number of sectors and a wide range of deal values, involving both ends of the spectrum from large PLCs to some of Scotland’s most ambitious start-ups.
Despite what is going on around us politically, around 15% of these deals had an international element (typically involving international headquartered companies looking to invest in Scotland or increasing their investment in Scottish businesses). This included New Zealand based Xero (a global leader in accounting software) acquiring the Scottish based Instafile business as part of its growth plans.
This activity seems reflective of the wider market in Scotland where an appetite for Scottish firms remains strong. Large multinationals who had their sights set firmly on global expansion in 2018 did not appear to consider Brexit a deal breaker. Indeed, Ernest and Young’s Scottish Attractiveness Survey in 2018 highlighted an unprecedented run of success for Scotland with a 7% increase in foreign direct investment projects, reinforcing the country’s reputation as the most attractive foreign investment destination in the UK after London. Latest figures also indicate that Scotland’s economy and international exports both continued to grow last year with employment figures being the lowest on record.
Domestically, Scottish businesses are used to a steely “business as usual” stoical approach to political uncertainty – perhaps because they have experience of living through years of limbo leading up to the Scottish referendum in 2014. This resilience has no doubt been a factor in the increase in investment and deal activity in 2018.
What can we learn then from the deals we have advised on over the last 12 months?
• Over 35% of the transactions involved our clients disposing of their business
• Just under 30% involved clients acquiring businesses
• 17% involved restructuring (many in preparation for a future planned sale)
• 10% involved equity investment
• 8% involved a range of other corporate activity.
Is there anything we can take from these statistics? At one level, it appears that many business owners are taking advantage of the availability of entrepreneur’s relief to realise the value in their business. Others are one stage behind and looking to re-structure to facilitate a tax efficient transaction in due course. Of the disposals/acquisitions in which we were involved, over 15% involved passing the business to existing management. A healthy mix of activity.
As we look to the year ahead, Scotland’s deals community appears to be thriving as businesses continue to prioritise growth and development over concerns of what may or may not happen. It will remains to be seen how the political uncertainty manifests itself but certainly, it appears that corporate Scotland is not sitting back and waiting.
Morton Fraser MacRoberts LLP
MacRoberts LLP, one of the largest independently owned law firms in Scotland, was founded over 150 years ago by the MacRobert family. We are a leading Scottish commercial law firm with full-service offices in Dundee, Edinburgh and Glasgow with a client base that reaches across Scotland and beyond.
