CORPORATE ICAEW.COM/CFF ISSUE 224 GROWTH FINANCE JULY/AUGUST 2020 OPPORTUNITIES FACULTY EXPERTISE Corporate Financier

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icaew.com/cfq CONTENTS

July/August 2020 Issue 224

GROWTH @ICAEW_CORP_FIN OPPORTUNITIES ICAEW Corporate Finance Faculty EXPERTISE icaew.com/cff PEOPLE 08 POWER A HELPING HAND David Staziker 31 Desire paths and his team at the Development Bank of Wales moved 32 Connections quickly to save jobs Find out who’s on the and livelihoods move in advisory, private equity and corporate law

34 On my CV Jon Stubbings explains how Grant Thornton helped LGC to get its 14 lockdown deal done MOVING ON UP Intelligent mobility is a big part of the 04 Editor’s letter UK’s strategy to be carbon-neutral by Adaptabilty is a key survival 2050. Brian Bollen skill, according to Marc Mullen finds out what the future holds 05 Faculty news The first ever online board meeting and a business finance boost

07 What’s next? Jackie Bowie says the scale 18 of economic challenges HARD TIMES make prediction a challenge Grant Murgatroyd looks at the effects of 11 Playing in defence COVID-19 on equity The UK’s deal regulators capital markets and should take employment asks: what will the fallout be across protection into account, the world? argues Jon Moulton

12 Machine tooled Parliamentary group analyses AI, investment and deals

25 American dream? Shaun Beaney reviews 31 Venture Capital Performance DESIRE PATHS Simmons & Simmons 26 Stand united M&A lawyer How have employee-owned Steph Featherstone discusses her businesses handled the international career global pandemic? and partnership ambitions 28 Heart of the matter Jason Sinclair speaks to dealmakers in the Midlands to find out how the region

COVER IMAGE: THE VERDIN COMPANY THE IMAGE: COVER will emerge from COVID-19

ICAEW.COM/CFF 3 WELCOME

Tough to call

In March, as lockdown began, the intention in my house was to use free time to learn new skills. A 30-year-old sewing machine was retrieved from our loft. One half-lesson and one impatient teenager later, and we needed a Corporate Finance mechanic to come and fix it. But no one was Faculty allowed to visit. Best-laid plans had gone awry. Likewise, businesses have always had to think Mo Merali on their feet. And many will have learnt a few Chairman new skills during the past few months. David Petrie In this issue’s cover story (pages 18-24) Grant Murgatroyd looks at Head of Corporate Finance just how capital markets have behaved as the horrors of the global Katerina Joannou COVID-19 pandemic became apparent, economies juddered, and some Manager, capital markets policy governments struggled to respond effectively. The markets have been pretty efficient at delivering some follow-on capital, including emergency rights Shaun Beaney Manager, issues. Many IPOs have been put on ice. Corporate Finance Faculty But there have also been some huge stock market debuts and encores in Grace Gayle the US – in early June, Warner Music listed on the NYSE, valued at $12.7bn, Services manager and later that week Chinese grocery delivery company Dada floated on +44 (0) 20 7920 8656 Nasdaq, valued at $3.5bn. Eva Mota No one is suggesting that the IPO window is wide open for everyone. Operations executive +44 (0)20 7920 8413 Political crises around the world – including China’s tightening of its direct control of Hong Kong and the Black Lives Matter protests following the fi [email protected] death of George Floyd at police hands in Minneapolis – have increased the Marc Mullen feeling that some very significant geopolitical changes are well under way. Editor When it comes to public companies, what’s likely over the next six months [email protected] is that activist investors will play an increasing role in their decision-making David Coffman (a subject we’ve frequently covered in Corporate Financier). How well Selina Sagayam Victoria Scott businesses have adapted to the crisis also reflects the quality of leadership Jon Stubbings they have, how nimble they have been and how well they have looked after Editorial panel their staff. Last year Nobel Prize-winning economist Robert Shiller’s book, For details about corporate and Narrative Economics: how stories go viral and drive major economic events, individual membership, please visit icaew.com/cff described how financial panics spread like epidemics – and how collective or contact the faculty on: behaviour as a result of ‘viral’ stories could enable analysts to predict how +44 (0) 20 7920 8689 markets will move. His previous work, Irrational Exuberance, suggested that To comment on your magazine, there was too much emphasis on stock market performance and too little please email: [email protected] focus on infrastructure, education and other forms of human capital. Irrational Exuberance was first published in 2000. Then a second edition in 2005 took in the bursting of the tech bubble. And in 2009, insight about the 2008 crash was added to a third edition. I do hope Shiller’s typewriter Corporate Financier is produced by didn’t break down during the first week of lockdown... Sunday 207 Union Street London SE1 0LN

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© ICAEW 2020 All rights reserved. The views expressed in this publication are those of the contributors; ICAEW does not necessarily share their views. ICAEW and the author(s) will not be liable for any reliance you place on information in this publication. If you want to reproduce or redistribute any of the material in this publication, you should first get ICAEW’s permission in writing. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by ICAEW, the publishers or the author(s). Whilst every care is taken to ensure accuracy, ICAEW, the publishers and author(s) cannot accept liability for errors or omissions. Details correct at time of going to press.

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4 JULY/AUGUST 2020 CORPORATE FINANCIER NEWS & EVENTS

NEW GUIDANCE FOR FINANCIAL FORECASTS

ICAEW’s new guidance about preparing YOUR prospective financial information (PFI) has been published. While early adoption is encouraged, the effective FACULTY date is 15 October 2020. The guidance for the preparation of forecasts, projections, budgets and business, revenue, profit, cost-saving and synergy plans can be accessed online at tinyurl.com/CF-GuidePrep It supports the preparation of any PFI so that it is relevant, reliable, understandable and comparable. Katerina Joannou, ICAEW’s capital markets manager, who convened the working group for new guidance, said: “Four overriding points apply when ON BOARD, ONLINE preparing forecasts – including in deeply uncertain times: work out who the The Corporate Finance Faculty organised their clients and investee companies to information is for and its purpose; root its first ever online board meeting on meet the challenges that they have the information in analysis of the business; 28 May as a result of face-to-face meetings encountered, as well as the prospects for make clear what the information relates to, being ruled out due to COVID-19. Board the world economy and M&A. the risks and uncertainties and how they members all joined via ICAEW’s ‘Lifesize’ “There was an invaluable sharing of are mitigated; and be ready to compare platform and were welcomed by faculty experience and market insights. It will help the forecast against the actual outcome.” chairman Mo Merali. inform where ICAEW should be directing Board members – who represent its efforts as we move to the next phase of advisory firms, companies, private equity the coronavirus crisis,” said ICAEW’s head and law firms – discussed government of corporate finance, David Petrie. “It will NEWS IN BRIEF emergency measures to help fund also shape the faculty’s output in the businesses during the pandemic. They second half of the year to address The Corporate Finance Faculty and also talked about how they were helping member needs.” Immerse UK organised a special online forum for innovative companies in the creative industries on 1 July. Fabio La Franca from Station 12, NEW BOARD MEMBERS Katherine Gilroy from Seedrs, Puneet Raj Bhatia from Funding John Rugman, partner and head of transactions at Smith & Williamson, London and Shaun Beaney from and Alistair Brew, head of investment operations at the BGF, have ICAEW were on the panel to discuss joined the Corporate Finance Faculty’s board. raising venture capital during the Smith & Williamson recruited Rugman in 2013 as head of valuations. COVID-19 crisis. It was chaired by He joined the firm from PwC, where he worked in corporate finance for Asha Easton, co-ordinator of two decades. He became Smith & Williamson’s national head of Immerse UK, a fast-growing network transactions in May 2019. for businesses, technologists, Brew joined the BGF in 2011 from Octopus Private Equity. Prior to academics and investors who are that, he worked for Close Brothers Investments and PwC. involved in developing VR, AR and Jane Vinson has stepped down from the Corporate Finance Faculty’s XR applications and services. board. David Petrie, ICAEW’s head of corporate finance, thanked her for her expert contribution to the faculty’s work. Corporate Finance Faculty members who normally receive Corporate Financier at their offices can choose to receive it at home by updating their BUSINESS FINANCE BOOST contact information by emailing [email protected] or online at tinyurl. The faculty has continued to work with the British Business Bank to update its Business com/CF-GetCFDelivered Finance Guide (BFG) hub in response to COVID-19. Chris Lowe, co-head of advisory at EY and Corporate Finance Faculty board member, has produced guidance for companies Members can also ensure that they making Coronavirus Business Interruption Loan Scheme applications. The BFG website receive the faculty’s monthly e-bulletin also recommends that businesses seek advice from chartered accountants and by emailing: [email protected].

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JACKIE BOWIE

Coming into 2020, with the path to government-backed loan schemes. Brexit slightly clearer, there was more WHAT DATA? Lenders are not insisting on their usual business optimism than there had been annual asset valuations, they are offering for the past few years in the UK. Making economic covenant waivers and interest payment But as the scale of the global policy deferrals. But this is not sustainable in the response to COVID-19 became evident, predictions is hard medium term. By Q4, when hopefully business owners and senior executives enough in normal times. there will be a sense of normality, the big moved from making decisions in the pause will have become the big reset. medium term to triggering emergency But with COVID-19, that responses and contingency planning – challenge is even greater LARGE-SCALE RESTRUCTURING not to mention the mammoth task of There is not a single sector or industry pausing operations and mobilising entire that will emerge from this unchanged; workforces to work from home. and it is not simply the case of adding Writing an outlook piece is always back lost earnings. Large-scale challenging, but this time it’s impossible restructuring, both financial and to look beyond the next three to six operational, will occur, and flow of capital months with any certainty. The effort to could undergo seismic shifts. Pension close the economy down in different parts funds will have to search (even harder) of the world is nothing compared to what for yield in the global low-interest-rate is needed to restart it – particularly under environment and the new dividend- new working conditions. The normal rules deprived world. This could mean higher of engagement are void. Economic data capital allocations to private markets – releases, company earnings guidance (for real assets, infrastructure and private those brave enough to provide any) and These are now under scrutiny and equity – which will help deal volumes. lender behaviour give very little insight increased protectionism would imply that However, this won’t happen until it is and so cannot be wholly relied upon. inflation is likely to be higher, not lower. perceived that asset prices fully reflect the Let’s take one key economic variable – revised return forecasts after COVID-19. inflation. Even collecting inflation data at COVENANT WAIVERS Comparisons are frequently drawn the moment is not possible – the normal While the extent of monetary policy with the global financial crisis of 2008. basket of goods does not apply in these support has been unprecedented, the But this time is different. The health of UK abnormal times, and statisticians are Bank of England (BoE) has always held lender’s balance sheets is such that even unable to physically collect anything. It’s firm in its view that UK interest rates impairment of the £50bn scale of the estimated that more than half of the input would not move into negative territory. financial crisis could be sustained data is missing. Economists have said we Former BoE governor Mark Carney was without a major impact on their ability are in a period of ‘no-flation’. frequently quoted as not being a fan of to lend and their capital ratios. As restrictions are eased, even the negative rates, highlighting that the UK’s The macroeconomic focus of this crisis direction of inflation will be a difficult call. financial system was not set up to deal will be on the health of sovereign balance The demand-side shock, the collapse in with them. However, his successor sheets (not only the UK’s) and on the oil price and the oncoming recession Andrew Bailey is not quite so adamant measures that will be taken long term to would all indicate lower inflation. and indicated that he would not rule out restore fiscal discipline. These policy However, COVID-19 is a supply shock negative rates for the UK. The market decisions will be the biggest influence on with a huge loss of productive capacity has already priced this in, with the UK dealmaking and transaction volumes not and inventory shortages. Further, the low government issuing its first batch of just next year, but for the next decade. inflation we have experienced in the past short-dated (three-year) gilts at -0.003%. few years is partially due to globalisation, On the micro-side of the economy, Jackie Bowie, co-head Europe, European with supply chains truly international lenders are being encouraged to support real estate, Chatham Financial. The firm and the lowest possible prices sought. borrowers – and this goes beyond the is a Corporate Finance Faculty member

ICAEW.COM/CFF 7 LENDING A HAND As COVID-19 forced the UK into lockdown, the Welsh government turned to the Development Bank of Wales to deliver loans to struggling businesses. Marc Mullen speaks to CFO David Staziker about saving jobs and livelihoods in the devolved nation

pod system to process applications. Rolling A week into the UK COVID-19 lockdown, out Microsoft Teams enabled people to work SUPPORT FOR MANUFACTURING the Welsh government and the Development from home and deliver the scheme with Bank of Wales launched a £100m loan minimal impact on our operations.” South Wales Metal Finishing scheme to support businesses affected by There were seven pods, with 70 staff (SWMF) is a long-established the global pandemic. By the second week allocated to them. The process included family-owned business, based of April it was fully subscribed. taking in application forms and checking in the former mining town of The COVID-19 Wales Business Loan eligibility, doing searches and customer Treorchy in the Rhondda Scheme, which was part of the Welsh due diligence, researching the investment Valley, South Wales. The government’s £500m Economic Resilience proposal, sanctioning each loan, checking business provides a range of Fund, came just a week after the measures the legal documentation and, finally, the finishing services including announced by the UK government – payment itself. zinc plating, anodising and including the Coronavirus Business Staziker recounts how the Development polishing to the engineering, Interruption Loan Scheme (CBILS). Bank worked with the Welsh government to automotive, medical, aircraft Welsh businesses could access CBILS or come up with a “very clear product” (see and metal pressing industries. the Bounce Back Loan Scheme (BBLS), ‘The Terms’, page 9): “Of all the applications It applied for a £100,000 loan introduced subsequently, as well as the we had, about 90% were new businesses to help safeguard 14 jobs in scheme from the Development Bank, which to us.” Staziker says this differed markedly the local community. offered loans of £5,000 to £250,000. from CBILs and BBLS, because the banks SWMF director Julia “We filled the gap while the banks were administered those programmes and in many Demaid said: “We now have getting to grips with CBILS delivery and Welsh cases lent to existing customers. He adds that every chance of weathering businesses were crying out for funding,” says the Development Bank, which is a member the storm of COVID-19. David Staziker, CFO of the Development Bank of the Corporate Finance Faculty, was able to We are so grateful for the of Wales. “We had to change the way we deliver because it is a lean organisation that support and the turnaround worked in order to deliver the scheme.” was able to alter its normal procedures time from applying for the Fortunately, the organisation was already quickly, allowing it to deliver more money loan. It has enabled us to part way through a two-year digitalisation to more businesses as quickly as possible. look after our staff at this programme: “Of our 230 staff, around a third The first loans were agreed on 2 April, just incredibly difficult time.” were reallocated from their usual job to a three days after the scheme was announced,

8 JULY/AUGUST 2020 CORPORATE FINANCIER PROFILE: DEVELOPMENT BANK OF WALES

and the first funds reached applicants the next day. The Development Bank previously invested in around 400 businesses a year, but in the first week of the scheme alone, approximately 1,500 applications were received. As at 17 June about £90m has been approved and £80m drawn down, with the average size of loans at almost £60,000. Perhaps most crucially, the number of jobs safeguarded is estimated at nearly 12,000. The Development Bank’s scheme got up to speed before the UK-wide schemes announced by Westminster could, as those covered far more applicants and were being delivered by multiple organisations. However, CBILS and BBLS are working pretty well now, Staziker says: “One of the challenges is on larger deals, where we take debenture security. Getting deed priorities agreed is CASE STUDY: THE HAND AT LLANARMON taking time because the banks have been overwhelmed with the volume of applications The Hand at Llanarmon, a hotel later. The loan helped safeguard going through them, and we need their input.” and spa near Llangollen, the future of the hotel and its staff. In addition to support from the UK Denbighshire, was one of the “The scheme really was a government, the Welsh government offered first businesses in Wales to lifeline for us,” said Greatorex. grant support via its Economic Resilience obtain funding from the scheme. “With 25 staff, the funding from Fund, which received almost 9,000 requests. The Hand’s owner, Jonathan the Development Bank of Wales Due to the scale of demand, it was put on Greatorex, applied within an hour means that their jobs and our pause in order to give them an opportunity to of the Wales first minister Mark future plans are far more secure. consider what further support businesses, Drakeford’s announcement of The response of the bank was charities and social enterprises need. the new fund on March 30. in sharp contrast to the Staziker explains: “For our loan scheme The Development Bank of conduct of high street banks, there was an initial surge of businesses that Wales was able to offer a who were coming under were panicking. Some needed cash and some £100,000 loan on 2 April, increasing criticism for just wanted a comfort blanket. This has and the funds were their handling of allowed them to stay in business. As we start transferred two days CBILS applications.” to open up, they’ll be looking at the working capital requirements of businesses, and that will be something particularly the government and the banks will have to work with. THE TERMS Leisure, retail, tourism and construction will be the areas likely to be in need of help.” The COVID-19 Wales Business for longer than two years and be Loan Scheme provided limited able to demonstrate that they companies, partnerships and were able to service that level of sole traders with loans of between debt prior to lockdown. The loan £5,000 and £250,000 at an interest amount was limited based on the rate of 2%, with an interest and number of people employed or a capital repayment holiday for calculation based on profit or the first 12 months. turnover. All sectors were eligible; 1,500 “The interest is accrued and has the sectors most active in been set at 2% to comply with applications were retail, hospitality LOAN APPLICATIONS RECEIVED IN THE FIRST WEEK OF THE SCHEME state aid rules,” says Development and services. Bank CFO (and ICAEW member) To prove serviceability, applicants David Staziker. “We take guarantees needed to provide three months’ of 20% of the loan value, capped bank statements for loans of £5,000 at £25,000. That was to ensure to £100,000. For loans of £100,000 £90m that the loan was used very to £250,000, two years’ annual VALUE OF APPLICATIONS specifically to help the business accounts, management information APPROVED AS AT 17 JUNE get through this period, and not and a cash flow forecast were for other purposes, such as required. The security requested refinancing existing loans.” was a personal guarantee of 20% of There are no arrangement or the loan value up to a maximum of 12,000 monitoring fees. Applicant £25,000. For loans over £100,000 businesses must have been trading a debenture also applied. JOBS SAFEGUARDED AS AT 17 JUNE

ICAEW.COM/CFF 9 ICAEW RESOURCES

COVID-19: stay up to date ICAEW is closely monitoring the COVID-19 pandemic and its impact on the economy, business and accountancy, with daily updates for members.

For updates, visit icaew.com/coronavirus MOULTON STEEL

JON MOULTON

At the time of writing, the passing peak need an explosion in jobs, not acronyms of the pandemic has been reflected in NO TIME FOR and petty regulation. diminishing yet immensely sad statistics Have our regulators in Britain taken job of morbidity and mortality. Inevitably the protection as part of their roles? Well, UK’s economy seems likely to have ACRONYMS mostly not – furloughs, redundancies suffered a hit of unprecedented and salary cuts are not activities visible proportions. Some estimates suggest that Protecting companies among the regulators. So they must still the outcome will be something around and employees has to be doing their bit. 10 times the impact prophesied by the This is a time for more radical changes. most pessimistic opponents of Brexit. be a policy priority as the The Competition and Markets Authority, The economy needs every bit of help UK slowly emerges from Financial Conduct Authority and other to avoid mass unemployment, and the organisations ought to be obliged to social and medical consequences that the COVID-19 crisis include employment preservation among will inevitably accompany a drastic their duties. Mergers of two weak reduction in activity. If there was ever a businesses should be considered not time to look at cost-heavy regulation, only on the competition grounds, but also it would be now. No one believes it’s on the basis of jobs saved. easy to change things, but anything that hinders productive employment WHAT REALLY COUNTS should be forced to have justification A unique opportunity exists to change – and quickly. We want our best one of the basic errors in our insolvency brains producing, not regulating. regime. Currently it is a stated objective Whenever I become introspective of the regime to preserve the company. and doubtful of my own usefulness, But who cares about the company? I invariably go to the publication section What matters is the enterprise and its on the Financial Reporting Council’s staff. Please swap the word ‘company’ for (FRC) website as a reliable source for ‘business’ so that more jobs will be saved. reassurance that souls with lesser There are quite a few other parts of purpose are still numerous. the insolvency regime that need to The FRC has posted about 60 original change to the same effect. documents since lockdown began 11 The extraordinary conditions we’re weeks ago, which the fully competent living through during the pandemic chartered accountant clearly should mean that debate will intensify about have already read. remuneration. Executives of companies As ever, some of the titles are that have made large-scale redundancies enticing. Decs taken by FRC extend Financial Reporting Council is a part-time can expect opprobrium if they award max dur audit engagement – qtr end position, it was agreed as part of his themselves big bonuses. 30.04.20 is not an obvious example appointment process that Simon Views on the purpose of business are of the FRC’s commitment to clarity. Dingemans could take on additional now rapidly changing. Profits are no And then there are the mysteries roles, provided they did not conflict with longer everything, and even dinosaurs provoked by the content itself. Why his responsibilities at the FRC. This has like me have to recognise that are the January 2019 non-executive not proved possible…” Possible? That corporations – especially the large ones director’s terms of appointment was intriguing, until it transpired he was that will fare best in this depression – suddenly published on 12 May 2020? off to Carlyle, to a no-doubt better will be expected to do their best for There must be a story here! remunerated private equity job. employees and society. And we There was a strange announcement in I have to believe that the flood is accountants will be expected to help by May, which said: “As the chair of the capable of significant reduction. We focusing on the most important issues.

ICAEW.COM/CFF 11 LOOKING TO THE FUTURE

Artificial intelligence (AI) is increasingly being used in corporate decision-making, investment and M&A. Last year, the faculty’s Dr Christine Chow, Shaun Beaney and Rosanna Woods of Hermes Investment Management Drooms co-authored the AI in Corporate When it comes to corporate decision- Advisory research report. This was making and investing, AI can benefit businesses in three key ways. followed in May by an evidence meeting Identifying opportunities: keyword held by the All-Party Parliamentary Group searches and news screens identify strategic fit and funding needs that on Artificial Intelligence (APPG-AI), hosted help potential acquirers build a remotely due to the COVID-19 pandemic pipeline of targets. Regulatory technology enables near real-time legal and tax compliance checks. AI supports document management and processing for transactions. Big data-led factor analysis can be used to assess intangible qualities such as corporate culture and customer trust. Near-real-time location and asset- level data, such as satellite images and on-site sensors, help analysts to collect and process data directly rather than relying on disclosure-based methods. Strengthening scenario analysis: interactive data visualisation helps decision-makers get past the noise of big data and makes analytics agile. These upsides can be captured with success if the risks are managed. Chaired by Lord Clement-Jones CBE (who is also a member of the Quantifying trust and culture requires a Corporate Finance Faculty’s board) and Conservative Party MP conscious choice of proxy indicators to Stephen Metcalfe, the panel comprised representatives of the seven measure them. The indicators may not organisations that presented evidence for the APPG-AI report: fully capture what needs to be assessed Jan Chan, TAS chief innovation officer UK, EY; and could be situational, so decision- Dr Christine Chow, head of Asia and global emerging markets, makers should understand the rationale Hermes Investment Management; and limits of them. Naomi Climer CBE, co-chair, Institute for the Future of Work; AI analytics are often associated with Sanu de Lima, deputy director, corporate governance reform, a degree of confidence in the results. Department for Business, Energy & Industrial Strategy; How do statistics and probabilities affect David Petrie, head of corporate finance, ICAEW; corporate decisions and pricing? Statistics Charles Radclyffe, former head of AI, Fidelity International; and refresher courses can help decision- Dr Zoë Webster, director – AI and data economy, Innovate UK. makers more confidently challenge the It was agreed that successful deployment of AI in corporate decision- recommendations presented to them. making and investment required an efficient and coherent AI strategy Companies should map out their across all phases, as well as regular audits of the deployed AI group AI footprint and an inventory of technologies. Furthermore, employees must be sufficiently trained. algorithmic models, with board Lastly, the government must work with businesses to safeguard the oversight for AI governance. This ensures responsible use of AI, ensure the upskilling of the workforce and group-wide consistency and efficient facilitate the supply of talent. use of resources. They should publish This article is a summary of the main points that the panel discussed AI principles that reflect business and that were raised during the Q&A, which saw 300 experts join online. strategy, demonstrating transparency The detailed Parliamentary Briefing is at tinyurl.com/CF-APPG-AI and accountability.

12 JULY/AUGUST 2020 CORPORATE FINANCIER AI IN CORPORATE ADVISORY

David Petrie, Therefore, we do not believe that head of corporate finance, ICAEW specific new regulation of AI in corporate finance is necessary. The potential for the use of AI-based ICAEW suggests that guidelines technologies in corporate decision- for the use and application of AI in making is unquestionable, although corporate decision-making and applications are still at an early stage. oversight by companies should: Machine reading and learning are recommend appropriate and already being deployed in virtual practicable levels of disclosure; data rooms that are used throughout ICAEW supports responsible include within corporate reporting the M&A deal process – particularly innovation by companies, financiers, requirements an explanation on the legal side, for contract analysis and corporate advisers. This is vital for about how AI-based technologies and in financial analysis, modelling ensuring public trust. have been deployed; and scenario planning. We recommend that corporate ensure clarity about the various The greatest potential for the finance practitioners adopt a responsibilities of corporate more widespread application of AI principles-based approach that takes executive and non-executive in the deal process is in, variously, into account the ethical codes and directors; and origination, company valuation, protocols that have already been encourage measures that boost due diligence and all-important developed for professional services investment and innovation in AI, post-transaction integration. and for broader investment activity. rather than hinder them.

Jan Chan, EY Charles Radclyffe, formerly Fidelity International “AI is sometimes feared as a risk to jobs, “What’s true of firms who have made but in the current situation we have the the most of AI-based technologies is opportunity to utilise AI-augmented that they’ve done three things: decision-making to respond quickly recognised long-term competitive to urgent challenges, which will be advantage that a data-centric approach required in order to boost the post-COVID-19 UK can bring; built the capability to deliver on this; and economy. AI will enable us to find solutions backed largely put in place the governance mechanisms to up with evidence-based computational statistics.” ensure the engine doesn’t fall off mid-flight. Boards and investors should take note of these themes and work to understand how to implement them in their own Naomi Climer CBE, Institute for the Future of Work operations or investments.” “It’s important to be really clear about what outcome the AI is meant to achieve. This then makes it possible to check that Dr Zoë Webster, Innovate UK it’s doing what was intended. It’s essential “The impact of AI will not be limited to audit the AI to check for equality, to a single sector or solely to the fairness, accountability, sustainability, transparency and firms that develop and produce AI data protection. It’s also necessary to take actions based on tools and technologies. Many sectors the audit findings to mitigate any issues that emerge.” have started to identify and pursue specific opportunities to use AI. This may be to boost productivity in their specialised processes or to Sanu de Lima, Department for Business, Energy & increase competitiveness and sales through the Industrial Strategy development of new or improved products, processes “One practical application of AI is or services for the market, such as to develop more around high-volume information analysis. personalised financial products.” For corporates in the first instance the application of AI could be really beneficial, partly given the increased demands on public companies when it comes to corporate reporting, and the number of things they have to report on. In light of the COVID-19 situation, we are looking at increased flexibility for equity raising in the market. It’s increasingly important for market supervision to The meeting was co-ordinated by Professor Birgitte be able to monitor quick developments – for example for Andersen, chief executive of the Big Innovation Centre, flexibilities for pre-emption rights in terms of raising equity.” and Dr Désirée Remmert, the centre’s AI lead ILLUSTRATION CREDIT/HERE ILLUSTRATION

ICAEW.COM/CFF 13 essential. And intelligent mobility will A to B in a more environmentally friendly The COVID-19 lockdown may have play an important part in doing so. and efficient way than we have done given us a glimpse of the future, with To the best of our knowledge, intelligent traditionally. And this is achieved using polluted skies clearing in many cities mobility or mobility-as-a-service (MaaS) traffic and goods flow data. across the world. But shutting down huge didn’t even exist just five years ago. But it The emphasis within this concept is swathes of the economy is obviously not has quickly become a phenomenon. on building up existing capabilities that sustainable. There are still emission Rupert Weston, an M&A partner at have entered into infrastructure targets to meet, so finding a way to keep Burges Salmon in Bristol, specialises in systems over the past decade, rather people, goods and economies moving transport. He defines intelligent mobility than the more capital-intensive route of while safeguarding the environment is as simply getting people or goods from tearing apart and upgrading existing SMART MOVES Intelligent mobility is likely to be a central part of the UK’s strategy to achieve a carbon-neutral environment by 2050. Brian Bollen looks at where investment is being made and what the future might look like

This page: Transport for Greater Manchester pilots a new mobility- as-a-service platform, IMOVE. Right, top: charging points for electric vehicles are on the increase. Right, bottom: passenger numbers will need to be limited in future

14 JULY/AUGUST 2020 CORPORATE FINANCIER INSIGHT: INTELLIGENT MOBILITY

infrastructure. The most immediately obvious examples to date include smart signalling on railways and smart motorways, which enable trains and traffic to run more efficiently, thus increasing capacity. In its declared aim to become carbon neutral by 2050, the UK is looking at expanding the network of charging points for electric vehicles in order to combat pollution.

TICKET TO RIDE In the wake of the COVID-19 pandemic, it looks like we will have a future where the demand for electric vehicles increases as the appetite for using public transport falls. Paperless ticketing was already becoming the norm and cheek-by-armpit rail travel will be shelved for now. Social distancing of some sort is likely to become the new normal, and with that may come mandatory pre-booking of seats and adoption of technology to reassure customers that passenger numbers will be limited. There is therefore huge opportunity for technology-based businesses to grow. For example, in April 2020 transport software business Tracsis acquired rail industry smart ticketing outfit iBlocks. Other companies will be using M&A to acquire new technology in instances where they lack the resource to develop FLEET OF FOOT it quickly themselves. Costain Group acquired transport tech In 2018, BGF acquired a minority RAC. In February 2017, it launched business Simulation Systems, which stake in Fleetondemand, which what it claims is the world’s first specialised in traffic monitoring, in 2016. has developed software to help truly integrated mobility-as-a- This allowed the large road builder to reduce the cost of moving people service application, Mobilleo. acquire niche technology that moved it and goods. “We conceive, build BGF played a key role in the into greater value-add areas of aftercare. and market technology that is acquisition of Fleetondemand’s “We’ve seen it in other sectors, where used by businesses to move longstanding partner, Fleet injecting technology into existing employees,” says its CEO Justin Europe, in August 2019. products has become important,” says Whitston. “They can find, book and Chris Boyes and John Eggleston Weston. “This might previously have pay for flights, trains, car hire, car led the investment for BGF in been done in-house, but now will often clubs, car shares and taxis, and use 2018, with KPMG acting as dictate recruitment by acquisition.” a company car fleet or arrange corporate finance adviser. Facebook’s approach to expanding its appropriate hotel accommodation. “We want to grow organically technology through M&A has been to We aggregate these capabilities and by acquisition,” says Whitston. into a single app that organisations “We are in the middle of a five- and individuals can use.” year plan, which we are currently Whitston built software-as-a- resetting to reflect the impact of “We’ve seen it in other service platform Intelligent Rental COVID-19. We plan to launch in Information System for Nexus Europe at the end of this year sectors, where injecting Vehicle Rental, which was sold to and move on from there. We have technology into LivingBridge in 2008. Then, in the firepower to 2011, he founded Fleetondemand. make acquisitions existing products has Its in-house technology now should suitable become important” manages millions in revenues and opportunities arise.” transactions for some of the Justin Whitston industry’s largest rental brands, Rupert Weston CEO, M&A partner, including Hitachi, Inchcape and Fleetondemand Burges Salmon

ICAEW.COM/CFF 15 identify a desired corporate capability EV RETHINK and then acquire a company that demonstrably has it. This quasi-VC In January 2020, Hyundai Motor trains, making them expensive, approach is being taken by large Company and Kia Motors inefficient and costly to run and companies, which are setting in-house Corporation announced a maintain. In contrast, Arrival’s investment funds to hedge their €100m investment in UK- Generation 2 vehicles have been technology bets. headquartered electric vehicle designed, with improvements in “The aim is to build a technology stable company Arrival. cost, design and efficiency. that might add value and buy strategic The investment marked the These vehicles are to be stakes in small and nimble technology start of a strategic partnership assembled using small companies. But they are not all expected between the auto-makers to footprint microfactories to succeed,” explains Weston. “It only accelerate the adoption of located in areas of demand. needs one or two to take off to make the commercial electric vehicles Arrival has created in-house effort worthwhile.” globally. Hyundai and Kia say software, components, Brian Wong, Bristol-based chair of Arrival technologies will help sustainable materials and the transport and technology mobility achieve their recently modular platforms. team at law firm and Corporate Finance announced goal to electrify The stated aim is for Faculty member organisation Burges their vehicle offering. Arrival, Hyundai and Kia to Salmon, says the future of transport Arrival is ‘reimagining’ vehicle use these flexible platforms – whether rail, bus, aviation, maritime design and assembly to create and technologies to create or cars – is integration. “No more silos,” the second generation of new purpose-built electric he states. “There will be an emphasis electric vehicles. The first vehicles across multiple on end-to-end mobility rather than generation were effectively vehicle categories. transport components.” existing fossil fuel vehicles In January, UPS ordered “Intelligent mobility will be app-based, retrofitted with electric power 10,000 bespoke vehicles. but we will also see a growth in the numbers of electrically powered and hydrogen-fuelled vehicles, more drones, the introduction of increasingly FOCUS THE MIND autonomous vehicles, and new models for – and modes of – micro-mobility, Waymo, which began life in “safe and hygienic personal such as e-bikes and e-scooters. All will 2009 as the Google self-driving mobility and delivery services”. be increasingly connected and project, closed its financing In December 2019, Waymo provide valuable data for integration round in May at $3bn. It says acquired Latent Logic, a and planning.” it will use this injection of UK-based start-up that uses In 2018, BGF invested £5m in capital to increase investment machine learning to develop Fleetondemand, which provides in its staff, technology and autonomous driving systems. transport integration software for its Waymo One and Waymo Latent Logic, which was spun businesses (see box, ‘Fleet of Foot’, Via operations. out of Oxford University, was page 15). Its CEO Justin Whitston says: Waymo claims that valued last June at nearly $8m “If you bring all forms of transport onto COVID-19 has underscored with a round of early-stage one app and nudge people onto public how fully self-driving funding. Former backers include transport, you rid cities of cars. Our technology can provide Oxford Capital Partners. vision is to make MaaS as convenient as owning what is, for 97% of its working life, a large parking machine.” There will be more autonomous vehicle projects, whether in the form of slow-

“Intelligent mobility will be apps-based, but we will also see a growth in the numbers of electrically powered and hydrogen- fuelled vehicles”

Brian Wong director, Burges Salmon

16 JULY/AUGUST 2020 CORPORATE FINANCIER INSIGHT: INTELLIGENT MOBILITY

ON THE IMOVE

Last year, Transport for Greater Manchester (TfGM) announced it was working in partnership with Fleetondemand’s Mobilleo mobility-as-a- service (MaaS) application to fire up its EU-funded IMOVE project. The aim was to create an integrated travel solution for the people of Manchester by improving how different modes of transport work together. Its goals are to reduce traffic congestion, improve air quality and encourage shared and active travel by allowing passengers to manage their journeys using a single application. The technology was enhanced by support from members of the Urban Mobility Partnership, which represents many different forms of urban transport and includes Enterprise Holdings, which represents car and car-share sectors. TfGM worked with the Mobilleo platform to consolidate multiple modes of transport into a single IMOVE-branded bespoke app. This provides travellers with instant access to car hire, car clubs, trains, buses, Metrolink trams and TfGM’s Local Link Service, allowing them to plan, book and pay for each journey using any iOS or Android device. There are four other moving pods such as those at Heathrow Top: transportation company Lime ‘European Living Labs’ provides dockless electric bikes and Airport’s Terminal 5, or full-sized vehicles scooters around the world. currently investigating and such as those being used in the ongoing Above: driverless pods transfer validating IMOVE trials – trials being carried out by Waymo, the passengers from car park to check-in Berlin, Madrid, Turin, and at London Heathrow’s Terminal 5 driverless car subsidiary of Google’s Gothenburg. The ultimate parent company Alphabet. aim is a scalable MaaS app Wong warns against over-hyping the for the whole of Europe. speed of technological development. lane-disciplined or with automatic braking Driverless cars will remain a concept to avoid accidents. As well as making rather than an everyday reality for the transport more efficient and cleaner, he foreseeable future. Only the low-hanging is of the view that intelligent mobility will fruit is likely be harvested in the near also make it safer and more affordable. term, such as autonomous vehicle systems As Whitston says: “On the surface, we being used in industrial applications and are selling future intelligent mobility on business parks, or as driver assistance services, but indirectly we are selling

ALAMY, GETTY IMAGES GETTY ALAMY, features, for example keeping cars future clean air.”

ICAEW.COM/CFF 17 Ring the changes

18 JULY/AUGUST 2020 CORPORATE FINANCIER COVER STORY

As COVID-19 turned into a global pandemic, equity markets went through a cycle of reacting slowly, taking a big hit, recovering a little, and then, in mid-June, falling back again. Grant Murgatroyd looks at how the crisis has affected public companies and IPOs and asks: what will the fallout be across the world?

inpointing exactly what made stock markets realise the severity of the coronavirus pandemic is difficult. Despite the PWorld Health Organization’s declaration of a Public Health Emergency of International Concern on 30 January, markets held steady through to the third week of February. The weekend of 23 and 24 February saw a double- digit increase in detected COVID-19 cases in Italy, Japan, Iran and the US, and the death toll outside China rose above 10. And on 25 February, the markets panicked. More than $1.7trn was wiped from the value of companies across the world in a single day. As the news became worse and worse, and countries brought in restrictions on both people and businesses, markets fell further. This downward spiral continued for a month. The composite index of the New York Stock Exchange (NYSE), the world’s biggest stock market, plummeted from 13,976 to 8,777 by 23 March – 37.2% was wiped off the value of companies. Over the same period, the FTSE All-Share Index of London-listed stocks lost 32.6%. Though confidence has steadily come back to the market, as at 15 June, the composite NYSE index remains 16.7% lower than it was on 21 February. The COVID-19 crisis followed a period when geopolitics

ICAEW.COM/CFF 19 STOCK EXCHANGES IN LONDON, NEW YORK AND ACROSS THE GLOBE ON A ROLLERCOASTER RIDE

FTSE 100 NYSE UK US COMPOSITE 8,500 16,000

8,000 “There’s a saying 14,000 7,500 that every bull market has to 7,000 have a wall 12,000 of worry and 6,500 those walls were increasingly 6,000 noticeable” 10,000 Chris Nicholls, 5,500 partner, financial advisory, Deloitte 5,000 8,000

4,500

4,000 6,000

1 Jan 20 Jan17 Feb 16 Mar 13 Apr 11 May 8 June SOURCE: LSE AND NYSE SOURCE: LSE

“A number of was dominating thinking in global markets. A long- quarter. The amount of capital raised in the rest of companies are mooted trade war between Western economies Europe has been less volatile. March was the slowest front-footed, and China was shaping up to be an issue for capital month with $4.18bn raised – less than half the $8.71bn raising equity markets across the world before the pandemic raised in February. so that as we became a reality. The fact that the virus started in While follow-on investment trends in Asia-Pacific move through China was not downplayed, and COVID-19 will have (excluding Japan) have broadly been comparable the COVID-19 merely postponed this battle (see ‘Future with other regions, the region has bucked the IPO period they can battlegrounds’, opposite). trends seen in other markets. The quietest month benefit from the In fact, geopolitical manoeuvrings have not abated. was February, as 39 new issues raised $5.6bn. In total, genuine market China is increasing its direct control of Hong Kong. 230 companies have raised $23.56bn. opportunity” There’s huge uncertainty about the coherence of US James Taylor, foreign policy under president Donald Trump. In CALM BEFORE STORM co-head of May, it was reported that UK prime minister Boris In the run-up to this call for follow-on capital, stock investment Johnson planned to reduce Huawei’s involvement in markets around the world had enjoyed a marathon banking, Numis the country’s 5G network to zero by 2023. bull run stretching back to March 2009. “Interest rates In April, the investment by China Reform Holdings have remained at extremely low levels,” says Gareth in LSE-listed graphics maker Imagination Technologies McCartney, EMEA head of ECM and global head of was stopped following UK government intervention. ECM syndicate at UBS. Assurances that the Chinese company would be a “Equities as an asset class have been attractive passive investor in the British one were unforthcoming. relative to a low or even negative interest rate provided by the bond market, providing both a RESCUE BIDS dividend yield and potential with capital upside. So, which equity markets have responded best to A lot of the money has gone into passive funds, “Investors are the chaos caused by the pandemic? which is indicative of an asset class decision to own principally In scale terms, the US is still on top. The IPO equities and get exposure without necessarily focused on their window may have shrunk in March, but it was left wanting to pick stocks. That led to a very low existing portfolio ajar and eight companies were able to raise $1.6bn on volatility environment and very good valuations in holdings rather US exchanges in the three months to April. Follow-on many parts of the market.” than looking at investment slipped to $2.5bn in March, but by May From a peak score of nearly 80 in October 2008, new investments” markets were running well and 74 companies raised volatility (as measured by the Chicago Board Rick Thompson, $35.2bn in a single month. of Options Exchange’s Volatility Index) settled. head of corporate The UK market, however, was arguably the fastest For most of the next decade it was below 20, with finance, Cantor to respond with $3.54bn follow-on raised by existing occasional spikes above 30 (such as in February Fitzgerald Europe listed companies in April – a shade more than the and December 2018). $3.53bn raised in the first three months. By Both came with market corrections as CNBC comparison, US follow-on fundraisings of $8.86bn Markets reported that it was unclear what had caused in April alone were less than half the total for the first either blip and that traders placed the blame on

20 JULY/AUGUST 2020 CORPORATE FINANCIER SLUGCOVER XXXXXX STORY

FUTURE BATTLEGROUNDS standards, misleading our investors,” In April, Reuters reported that argued Van Hollen. While Kennedy said: China was urging domestic companies The passing of US Senate bill, Holding “China is on a glide path to dominance to look at listing in London and Foreign Companies Accountable Act, and is cheating at every turn.” strengthen overseas ties in the wake introduced by Democrat Chris Van US exchanges could become of the COVID-19 crisis. Chinese Hollen and Republican John Kennedy battlegrounds for the US and China. authorities have given the go-ahead on 20 May, is perhaps a sign of things to During the same week the bill was for China Pacific Insurance and come. The bill could force some Chinese passed by the Senate, Nasdaq SDIC Power to reboot their plans to companies to de-list from US Exchanges. introduced rules that required list their shares in London after both The new regulations demand that companies to raise $25m or a sum deals were halted last year. companies must apply with US equivalent to a quarter of the value of European Commission vice-president accounting board audits for three the group, in addition to having a Margrethe Vestager told the FT that previous years in order to list in the special adviser familiar with the levels of she had no issues with “states acting as country. Companies must also disclose transparency necessary to be a market participants if need be” in the whether they are owned by a foreign listed company in the US. context of protecting businesses from power. Chinese and Hong Kong- Both moves came in the wake of an Chinese takeovers. registered businesses prohibit US accounting scandal involving the With it being election year in the inspection of their accounts. Chinese coffee chain Luckin Coffee, US, it will be very interesting to see if the “For too long, Chinese companies where there was evidence that $310m country has any further moves and what have disregarded US reporting of sales had been fabricated. approaches will be taken elsewhere.

ICAEW.COM/CFF 21 “actions by the Federal Reserve and that other while US Federal Reserve cut interest rates and favourite scapegoat, computerised trading”. committed $700bn to asset repurchases only to “We were effectively more than 10 years into a bull remove that ceiling a week later as it committed to use market,” says Chris Nicholls, who leads the UK IPO “its full range of tools to support the US economy”. and equity capital markets team at Deloitte. “So The speed and scale of the policy response did although a lot of indices were at significant highs, they much to calm nerves. Rick Thompson, head of “Investors are were very much prone to bouts of worry and in the corporate finance at financial services firm Cantor more than happy last two years have seen these big risk-off moments. Fitzgerald Europe, says: “Investors are principally to support “There’s a saying that every bull market has to focused on their existing portfolio holdings rather their existing have a wall of worry and those walls were increasingly than looking at new investments. They have used investments, noticeable. Even before COVID-19 struck there were their cash to support portfolio companies with providing that a lot of people that were not confident. Issuance in working capital and for balance sheet repair.” they think London of around £30bn in 2019 was reasonable, There had been a steady stream of follow-on that what was but it was far from a rosy IPO market.” issuance in the UK in early 2020. In January, 24 a profitable In January and February there were three IPOs companies raised a combined £1.44bn. In February, business before on the LSE of UK companies, raising a total $590m, 25 companies raised £1.52bn. COVID-19 will according to data provider Refinitiv. One of them Then in March there was a dramatic reduction, with be a profitable included FRP Advisory (a member of the Corporate 27 companies raising just £566m according to data business after” Finance Faculty), which achieved an £80m from Refinitiv. While there may have been no IPOs Diane Craig fundraising at a valuation of £195m. Cenkos Securities since then, investors have performed an admirable head of capital acted as sole book runner, nomad and broker on the job supporting listed companies with a total of 100 markets, RSM AIM issue while Dentons provided legal advice. follow-on issues and more than £10.8bn raised. The issue was a sign of the relative health of the market, with investors willing to commit to a ON THE FRONT FOOT… people-led business where existing shareholders were Capital raisings have been both defensive and taking a considerable amount of cash out. The IPO opportunistic with rights issues and placements the completed a process that had been mooted in 2018 preferred method (see ‘Banged to rights’, opposite). but shelved because of Brexit-related uncertainty. Online fashion retailer boohoo raised £198m in a At the beginning of June, Warner Music Group private placing through an accelerated book-build listed on the NYSE. The company was valued at with Zeus Capital and Jeffries International acting as “We’re probably $13.3bn. Later that week, Chinese grocery delivery joint global co-ordinators. It says: “The group intends in late phase two company Dada went ahead with its IPO on Nasdaq. to use the net proceeds of the placing to take at the moment, The listing valued the company at $3.5bn, despite advantage of numerous opportunities that are likely in stabilisation, warnings in the prospectus that it could be delisted. to emerge in the global fashion industry over the which is still Then, on 16 June, Royalty Pharma raised $2.2bn, coming months. The group continues to review a very fragile valuing it at $16.7bn at IPO and at well over $26bn number of possible M&A opportunities.” and volatile” by its first-day close. With JP Morgan, HSBC and Barclays Bank as Gareth McCartney The same week, Nasdaq-listed Chinese e-commerce book-runners, Numis Securities acted as a joint EMEA head of ECM group JD.com raised $3.9bn from a secondary listing co-ordinator for the £247m placing of ASOS, in and global head of in Hong Kong. addition to an extension of the online retailer’s ECM syndicate, UBS £350m debt facility. “While the company’s financial RAPID RESPONSE position remains robust, the duration and impact As the pandemic unfolded, governments and central of the COVID-19-related crisis remains uncertain banks acted decisively. On 11 March, the Bank of and ASOS wants to ensure it can weather and exit England announced a range of measures including the current trading environment in a position of a 50-point rate cut to 0.25%, a new Term Funding strength,” said ASOS. Scheme that could provide more than £100bn for Numis has worked on what James Taylor, co- companies and contained special measures for head of investment banking, calls front-footed equity SMEs, and a reduction in countercyclical capital raising for a host of UK companies, including ASOS, buffer for banks to 0%. On the Beach and Keyword Studios. “Equity markets The European Central Bank launched a €750bn have been very active in March through May,” he says. temporary asset purchase programme on 19 March, “A number of companies are front-footed in the

The European Central Bank launched a €750bn temporary asset purchase programme on 19 March, while US Federal Reserve cut interest rates and committed $700bn to asset repurchases, only to remove that ceiling a week later

22 JULY/AUGUST 2020 CORPORATE FINANCIER SLUGCOVER XXXXXX STORY

BANGED TO RIGHTS

Stock market activity on the London Stock Exchange since COVID-19 has been dominated by rights issues, with the vast majority executed through ‘cash box’ placements, where up to 20% of the issuer’s share capital can be raised without the need for shareholder approval or a prospectus. AIM companies are not even restricted by the 20% ceiling and can exploit the whole of any unused allotment authority granted at its AGM, typically set at a third of its share capital. Deloitte’s Chris Nicholls sat on TheCityUK’s review panel in 2015, which made a number of recommendations as to how to increase flexibility in the ways that growing companies can access capital markets. But, until the coronavirus crisis, uptake had been low, largely because of investor concerns. “The rules were changed for the better,” he says. “These things happen very, very quickly. You have two days of pre-marketing before the announcement, then often they’re announced at seven o’clock in the morning and closed by lunchtime or early afternoon.” The mechanism enabled UK-listed companies to respond faster to the changed environment than their peers in the EU or even the US. Cash boxes have played a central role, but there have been criticisms. “Because they’re effectively intraday transactions, they are open almost exclusively to investing institutions and existing shareholders,” says Nicholls. “That has led to a very valid debate about how to accommodate retail investors in these offers.” Hospitality group Whitbread launched a rights issue to raise more than £1bn on 21 May, eschewing the cash box route and issuing a prospectus that will allow all its existing investors to participate. Morgan Stanley and JPMorgan Cazenove acted as joint sponsor, corporate broker and global co-ordinator.

ICAEW.COM/CFF 23 COVER STORY

and £365m from existing shareholders (but not until underwriters Morgan Stanley, Deutsche Bank and JP Morgan Cazenove dropped the share price by 86% from 207p to just 30p). “Investors are more than happy to support their existing investments, providing they think that what was a profitable business before COVID-19 will be a profitable business after,” explains Diane Craig, head of the capital markets team at RSM. “They’re not going to just blindly write cheques to prop businesses up where the whole business model has been called into question.” She adds that investors are more focused on how companies protect themselves through COVID-19 and what that means going forward. This means there will be a lot more angles and detail to the due diligence than before. Carlton Nelson, co-head of corporate broking at SITTING THIS ONE OUT? Investec, says: “Equity markets have performed extremely efficiently. People looked quickly and in The success of equity capital markets in meeting the needs of listed depth at the facilities headroom and how they were companies has left little room for alternative sources to get in on the going to weather the storm over the coming three, six, act. In the early days, banks hunkered down. RSM’s Diane Craig says a nine, 12 months and even beyond that, depending on potential refinancing was in the early stages and was put on hold by the sector. It’s been really encouraging to see some debt institutions who wanted to assess the impact of COVID-19: institutional investors in public markets supporting “Banks weren’t looking to put new things to committee until they had these public companies. It wasn’t long ago that there a better feel as to what COVID-19 was going to look like. Now that was a lot of chat about how public markets aren’t the we’re several weeks through they have relaxed a bit, but the due way to exit your business any more, given access to diligence process will be much more thorough, it will take longer, and private capital. The past two or three months has they will want to see a lot more scenario testing.” proved it’s an extremely good place to be.” UK banks have also been busy with the various government support Two to three months in, and investors are schemes. “It took time to get the infrastructure in place to start to becoming a little bit more judicious. “Right from the process applications for funding, but capital is starting to flow,” says start it was clear that investors had gone through their Fenton Burgin, head of UK advisory corporate finance at Deloitte. portfolios and worked out which companies were likely “Support has been requested in consumer, travel, hospitality and other to need to raise capital and which weren’t, and had stressed sectors and we expect that to continue through July and earmarked capital for those potential raises,” he adds. August as more companies run out of cash. With a V-shaped recovery “There’s clearly been a lot done by the fund managers looking increasingly unlikely, it’s going to be a longer haul for many.” to ensure that they’ve got the right levels of cash to PE funds have been largely kept from the market by a need to make fund their existing portfolios.” sure their existing portfolio companies are in good shape. “While PE So what does the future hold for markets? funds have had the opportunity to look at public companies, there has McCartney says there are three phases as far as listed been competition from shareholders who are very keen to support companies are concerned. The first was general good companies and have stepped up,” says UBS’s Gareth McCartney. equity de-risking, COVID-19-induced and accelerated by the slump in the oil price. “Investors sold aggressively to get their growth exposure down, and it was quite indiscriminate,” he says. current environment, raising equity so that as we Phase two was one of stabilisation, where the move through – and hopefully out of – the COVID-19 indications were that the world was headed in a better period, they can benefit from the genuine market direction, partly due to the speed of policy response, opportunity that is there for them.” and partly because the market was technically oversold at that point. The third phase will be the recovery …AND ON THE BACK FOOT phase, when credit and volatility indicators are Many companies have had to raise capital to survive normalised, most people are back at work and the but, where the fundamentals are good, have found economy is back on a more level playing field. the market receptive. Pub chain Wetherspoons “We’re probably in late phase two at the moment, raised the £141m it targeted in April at just 6% of a in stabilisation, which is still very fragile and volatile,” discount to the share price, saying the money was says McCartney. “Every recovery is bumpy and it’s not sufficient to cover closure of its pubs until June and going to be a simple V-shape, but for COVID-19 slow trading on reopening. specifically to cause a serious longer-term equity The road was particularly bumpy for carmaker Aston correction there would have to be a major second Martin Lagonda. It took almost a month from March to wave. It’s more likely that the bigger risk to markets complete its rights issue and the company raised would come from the company and macro data as £536m in total – £171m came from a private placement equity investors refocus their attention there and they

with a consortium led by F1 magnate Lawrence Stroll did not reflect the anticipated recovery.” MILEMMIUM IMAGES IMAGES, GETTY VERDIN COMPANY, THE

24 JULY/AUGUST 2020 CORPORATE FINANCIER BOOK REVIEW

The US has been wracked by social the proposition that outlier performance and political tension in the wake of the CALIFORNIA by the very best US funds accounts for COVID-19 crisis and the events that a lot of the difference with Europe when led to the Black Lives Matter protests. it comes to average investment returns. But there is no doubt that the DREAMING Success breeds success. Well known superpower still leads the world in many VC brands attract top talent, the most things. One is venture capital. China is Is the US a world lucrative ventures and influential racing up the VC rankings. Europe – limited partners to their funds. with London as its most successful hub – apart when it Big-name partners at VC firms can produces some deep R&D and comes to backing sometimes make big decisions technological know-how. But the West without requiring the consensus of Coast is still king when it comes to early-stage high- investment committees. turning digital ideas, expertise and tech companies? funding into high-growth companies. ECO-FRIENDLY Dr Keith Arundale’s new book, Venture Shaun Beaney The American market’s deep pools of Capital Performance: a comparative reviews Venture capital encourage VCs to wait for an study of investment practices in Europe Capital Performance optimal exit – there’s less pressure and the USA, is based on PhD research for premature trade sales that might he undertook at the Adam Smith by Keith Arundale, generate lower returns. Business School. Arundale, a long- Arundale highlights a VC-friendly standing ICAEW and Corporate Finance which explains the culture and attitude to risk in the US: Faculty member, has taken a qualitative country’s success “Open networks encourage information rather than data-led approach, sharing and hence better knowledge interviewing members of 64 VC firms in of new technology developments and the UK, continental Europe and the US, markets, in contrast with a more closed as well as LP investors, corporate and proprietary approach.” venturers, entrepreneurs and advisers. I’d add that luck plays a significant He argues that although the UK, for part in success, of course. And many example, has plenty of start-up VCs and the companies they back money, technological innovation and benefit from direct public subsidies in entrepreneurs, “there is a need for various forms across the world – as quite fundamental changes in both the well as substantial tax breaks. practice of European investors and in The book was published just as the wider ecosystem”. COVID-19 went global. The crisis could have a big effect on how different DOUBLE DOWN nations co-operate and compete. American VC funds have greater Several US VCs have in recent years scale, which enables them to make set up European offices from which to bigger bets and follow their money source new deals. But the talent drain in young, high-growth businesses to the other way, to California, remains a scale up quickly. Bigger funds make it big problem for Europe. Arundale easier for partners to double up on quotes the lament by Herman Hauser, deals, and to share information, co-founder of chip designer ARM and insights and expertise with each of Amadeus Capital Partners, that “the other. They can also employ external story is that the best of Britain is going venture partners who bring even more to the United States to scale up”. specialist skills and knowledge. Therefore, points out Arundale, Top VCs recruit partners who it’s probably good news that UK themselves have impressive venture firms founded in the past entrepreneurial and operational 10 years have adapted many of the backgrounds and contacts. They can characteristics of the best-performing check out disruptive technologies US funds. and develop investment themes. This ensures that those partners see the best deals, carry out very effective due diligence and ‘groom the Shaun Beaney works for the Corporate investments to success’. Finance Faculty on innovation The one-in-10 strategy, of seeking at investment, access to finance, high- growth companies and venture capital least one major success in a portfolio, is a well established approach in the US Keith Arundale, Venture Capital Performance: a comparative study of and generates most of a fund’s return. investment practices in Europe and the At the centre of Arundale’s research is USA, is published by Routledge

ICAEW.COM/CFF 25 UNITED WE STAND

The number of employee-owned businesses has been increasing in recent years. How have they coped with the COVID-19 crisis? Deb Oxley OBE, chief executive of the Employee Ownership Association, provides an update

adapting to a ‘new normal’ as we followed by manufacturing at about When it comes to employee ownership emerge from a complete lockdown to a 20%, and then retail/distribution and of a business, the goal is to create a conditional and managed new way of health/social care, there have been culture that inspires trust between existing. Businesses owned partly or different impacts on and responses to colleagues and leaders. This should entirely by employees are still just the COVID-19 crisis. Approximately 30% enable them to quickly unite and adapt businesses. They have the same of the employee-owned workforce is in times of crisis. Whether the business challenges of cash flow and access to furloughed, which reflects the national has had to hibernate, struggled to finance. Employee relationships and trend, with many smaller businesses survive, innovate and pivot to new work, engagement should support their ability accessing business rate relief. or has been a ‘key worker’ company that to adapt, innovate and flex during this After inevitable early teething has thrived, employee owners unite crisis, and support their resilience. With problems, more Employee Ownership behind a common purpose. The a national appetite to ‘build back better’, Association (EOA) members have had COVID-19 crisis has certainly tested that. employee ownership must play its part. their Coronavirus Business Interruption The word ‘recovery’ is omnipresent, Loan Scheme (CBILS) applications but it’s defined as a ‘return to a normal ACCESS TO FINANCE approved. Initially, demands for state’. That seems some way off. Rather, With 50% of the British employee- personal guarantees and some other in the UK we now face a period of owned sector in professional services, conditions meant some were unable

26 JULY/AUGUST 2020 CORPORATE FINANCIER COMMENT

to access this money, because of their Transparency and regular “Many EOA members are business structure. After pushing the communication with employees has already using the lessons government on behalf of employee secured the ongoing support. owned businesses, who in turn Cumbria-headquartered WCF was of the past 10 weeks in the pushed the banks, access to CBILS, established in 1911 as a farmer co- UK. Some are learning from Coronavirus Large Business Interruption operative before becoming partly their own global operations Loans Scheme, the Covid Corporate employee-owned in 1988. It has a on how they can move Financing Facility and the Bounce Back diverse range of activities employing from surviving to thriving Loan Scheme became as available to about 300 staff across 30 locations. employee-owned businesses as they Two-thirds of them could not carry out post-COVID-19” have been to any others. duties at home when the crisis hit and Deb Oxley OBE, lockdown began. chief executive, Employee EMPLOYEE ENGAGEMENT From the outset, the focus was on Ownership Association Since lockdown, the EOA has run a open and honest communications, series of weekly webinars, highlighting including the EOA’s own daily briefings examples of flexible decision-making that ‘translated’ the UK government’s and agility. Much of the success of this daily briefing from the previous evening. type of company appears to be linked Safeguarding the long-term future of the safer environments to work in, whether to effective communication and business was the strategy from the social distancing in warehouses and leadership engagement. beginning. That secured employee offices or easy-to-wipe surfaces in As the UK moves into the next chapter owners’ understanding and support for communal spaces and shops. of this pandemic, these businesses will what has been a series of difficult Many EOA members are already also rely on other characteristics of decisions. With the adoption of furlough using the lessons of the past 10 weeks employee ownership, in particular, the and many staff being hourly paid, all in the UK, some are learning from commitment to employee engagement, workers, including those on a salary, their own global operations on how taking a long-term view and prioritising were offered a welfare loan to top up they can move from surviving to the collective care of all employees. payments to full net pay, with time to pay thriving post COVID-19. One of the takeaways from a webinar back and support to manage their Gripple, a fast-growing manufacturer in May featuring the UK’s largest financial position once they were back in of wire joining and tensioning systems, employee-owned business, John Lewis work. These measures got the full is 100% employee owned. It has already & Partners, was that its digital backing of all the employees, and innovated products for use in future engagement during lockdown has there was a real sense of everyone workplaces. It is using its experiences helped deliver quicker decision-making. being in it together. of having people working at home and Rowlinson Knitwear, a producer of the technologies used during schoolwear and corporate wear based in INNOVATE AND FLEX lockdown to fast track its strategy of a Stockport and another EOA member, Many employee-owned businesses four-day working week to improve responded to the crisis by moving have demonstrated the shared productivity and staff welfare, as well as quickly to home-working and shift- endeavour that defines their status. reduce its carbon footprint. working, and engaged with all the The trust needed among the workforce Cosmetics giant Lush has 10% of employee owners about taking pay in their leaders to support decisions shares held in trust for all permanent cuts that ranged from 50% for highest around finance or the manufacture of Lush employees. It is using 420 earners to 10% for those earning more new products or implementing new employee reps to keep colleagues up than £21,000, while those earning less ways of working is significant. to date on the business, while many did not have their pay reduced. Many EOA members are stores have had periods of closure When customers’ premises closed, manufacturing businesses that have across the globe. They have focused on they then changed tack, taking the pivoted to help the COVID-19 efforts. servicing online sales, which have decision to furlough 75% of workers, Scott Bader developed a new modifier increased by 300% through the crisis. prioritising those who were vulnerable for alcohol-based hand cleansers in It has developed new hand care and those who would have to use just 10 days, which enabled other products, renegotiated high street rent public transport. Having shown manufacturers to produce greater and is now planning to redesign stores strong leadership, being open and volumes of hand cleanser, and many to give customers a safe experience transparent and offering mental are producing personal protective when they reopen. health and wellbeing support has seen equipment. Most of the employee- In the wake of this crisis, many positive feedback from staff – many owned public service mutuals have organisations will be looking for ways furloughed workers have used their time flexed to make sure their community to permanently build in higher levels learning new skills for the future benefit response has freed up hospital beds. of engagement, more appetite for of the business. Hull-based City Healthcare Partnership innovation, and more operational and “If you do the right things in the first CIC worked with the local hospice to use financial resilience. Based on the place, your people will trust you,” says an empty ward, and turned the whole experience and evidence of the Simon Pool, founder of employee- project round in less than 10 days. sector during this unprecedented owned Jerba Campervans, with regard Flowstore and Novograf have innovated period, for some the answer may well

GETTY IMAGES GETTY to furloughing employee owners. products that help businesses create be employee ownership.

ICAEW.COM/CFF 27 HEART OF THE MATTER Jason Sinclair looks at M&A in the Midlands and how the region is likely to emerge from the COVID-19 crisis

There were feelings of optimism among dealmakers in the Midlands at the start of 2020, according to Satvir Bungar MBE, Birmingham-based corporate finance managing director at BDO. After a dip in M&A activity the previous year, many felt a bumper year lay ahead. “Nobody could have predicted the impact of COVID-19 in such a short space of time,” says Bungar. “We were days away from the completion of one deal, then that market became frozen overnight and their excellent business plan was instantly overturned to focus on short-term cash and leveraging the available government measures.” While some of the Midlands’ strongest sectors (such as automotive and aerospace) face double uncertainty as stalled deals are resurrected and companies seek to due to COVID-19 and a potential no-deal end to the build resilience through extra funding. “As we come Brexit transition period, Bungar says that others have out of the situation, the strain on working capital and been less affected. Deals involving TMT and life the need to recapitalise will become more acute,” he sciences have held up, while the Midlands’ position as explains. “And corporate balance sheets are going to the centre of the country’s retail warehousing and suffer – whether because of new credit payments or “There’s been logistics supply chain has seen companies become reduction of government support.” a real divide more attractive in the crisis, with thoughts turning to Nick Gillot, a corporate finance partner at Grant between long-term behaviour changes as lockdown eases. Thornton in the Midlands, says statistics suggest that sectors, but “There’s been a real divide between sectors, but 90% of all M&A transactions have stalled two months businesses that businesses that are disrupting sectors by using tech into the crisis and that the impact on market activity are disrupting are attractive,” says Bungar. Along with other experts, had been profound: “Although activity remains at sectors by he expects an uptick of activity in the medium term, significantly lower levels, many businesses we speak using tech to feel that they can see the light at the end of the are attractive” tunnel from a trading perspective and that they’re Satvir Bungar through the worst.” MBE, managing SPEAKING OF PRIVATE EQUITY... director, BDO Gurinder Sunner, head of the Business Growth Fund (BGF) in the Midlands, comes to a similar conclusion. “I categorised lockdown into three blocks,” he says. Above centre: the “When it happened, we looked inward. We have Jaguar Land-Rover about 40 portfolio companies in the Midlands, so it team work in personal protective equipment. was about making sure we understood what was going Above right: on there. We then ended up in a place where we were The National executing on deals with businesses we already knew. Automotive Innovation Centre In those first two stages we were not seeing anything at the University new come to us. By mid-May a steady trickle of new of Warwick Left: lab staff at the conversations started happening. Most businesses Queen Elizabeth began the crisis by looking inward, finding what Hospital Birmingham

28 JULY/AUGUST 2020 CORPORATE FINANCIER ROADSHOW: MIDLANDS

ICAEW IN THE MIDLANDS

Sophie Dale-Black, ICAEW’s regional director for the Midlands, has been working overtime (from home, of course) to keep local members connected both to the Institute’s expertise and their own networks and potential clients. “People might want to pivot their business models and think about cash flow. We are working hard to connect chambers of commerce and local businesses to our members’ advice service,” she says. “The message needs to get out that chartered accountants are here to support the recovery.” schemes there were available to them and reducing ICAEW is bringing together new virtual their cash burn. Now they’re starting to open their member groups to support local, connected eyes to discover what post-lockdown will look like, communities. A greater geographic spread and what they need to do to be financially strong.” than has been possible for physical events, with Sunner says that the BGF, which is a member of the “virtual activity eliminating the distance issue”, Corporate Finance Faculty, is in a unique position as a “Many as Dale-Black says. Dale-Black has also worked long-term investor, with flexibility of cheque size and businesses we closely with the Corporate Finance Faculty, debt. He sees his competitors as being traditional speak to feel which has many members in the Midlands. private equity, venture capital and senior debt. that they can “We’re being as agile as we can to make “But our biggest competitor is businesses ‘doing see a light sure members have the opportunity to meet nothing’ – where companies are keeping the status at the end of and discuss key topics and to get all the quo and growing at 5% rather than 15% and not taking the tunnel” support they can from ICAEW. We want to the next step,” he argues. “I think the current Nick Gillott, increase member engagement by increasing situation might change the ‘do nothing’ mindset, corporate the geographic coverage with, for example, because there could be a nervousness that if anything finance partner, virtual groups in Nottingham, Derby and Grant Thornton like this happens in the future, it would be hugely Lincoln, focusing on sole practitioners who beneficial to have an extra partner sitting around the might not otherwise have the network to table who has deep pockets and brings the benefit ask for advice.” of looking at this situation across such a wide Social media, tailored emails, expert webinars portfolio, so they don’t have to figure out problems and dedicated breakout groups are among the by themselves. If we can turn that ‘do nothing’ tools being used. “With large webinars, it’s hard mentality into ‘do something’, we’ll have some to have discussions around the content, and pretty good dealflow. breakout local groups are a great forum for “Lots of traditional private equity players will be doing that and making the most out of the wider taking a slightly different view to us, and the debt resources,” Dale-Black explains. “Feedback from markets will be not as prevalent or open as they have members shows they don’t want to see these been for the last few years.” Ultimately this means virtual sessions as purely short term. They’re not it’s more difficult for them to do deals. just a response to COVID-19, it’s what we should Other houses with large footprints in the Midlands be doing anyway.”

ALAMY, GETTY IMAGES GETTY ALAMY, include LDC (which has a 30-year presence in

ICAEW.COM/CFF 29 ROADSHOW: MIDLANDS

Birmingham and Nottingham), Palatine, NorthEdge post-COVID-19 situation and moves into recovery. We and Equistone. will need to assess the trading environment then, to get Neil Meredith, head of corporate finance at EY in the a sense of how sustainable each business is and how it Midlands, says: “We continue to have conversations will grow post COVID-19. While private equity will be with private equity investors about acquisition circumspect, we still believe deals will happen. We opportunities, in particular for their portfolio “The more recently exchanged contracts on a sizeable private businesses. We believe that there may be opportunities people we equity deal where the investors were able to assess the to acquire good businesses at more attractive prices have, the better. transaction risks and get comfortable, demonstrating than would have been the case six months ago. It’s worth us all that deals can still happen in difficult times.” Also, corporate carve-out transactions are continuing, being nice to where sellers’ primary focus is to achieve an exit, each other” SELF-SUFFICIENT even if this means a compromise on value. Gurinder Sunner, Meredith sees the strength of the Midlands corporate “Private equity is likely to be more cautious over the head of Midlands, finance community as a further route to generate next 6-12 months as we see how the market reacts to the BGF deals over the next year: “There’s a pretty self- sufficient and vibrant adviser and funding market in Birmingham and the Midlands that will help drive and support deal activity post-crisis.” Having great relationships with a strong network of professionals in the area is vital to dealmaking, says Bungar. “I’ve always known you can have sensible conversations and get views quickly here, thanks to longstanding relationships. On transactions where I have a say in which corporate lawyer we use, for “There’s a example, I try to leverage the relationships I have – pretty self- partly for working with individuals you trust. Those sufficient and relationships are going to be even more important as vibrant adviser we emerge from the COVID-19 situation.” and funding Sarah Taylor, a corporate finance partner at PwC market in the with experience across the regions, categorises the Midlands” Midlands community as “good – maybe not as Neil Meredith, collegiate as other regions like the North, and head of corporate proximity to London means it’s not quite as self- finance, EY contained – but in the COVID-19 crisis people have THE POTTERIES checked up on and looked out for each other”. Sunner sees the region as “a bit of both” when asked In March, the BGF invested £8m in Stoke-based if the community is collegiate or competitive. “There’s manufacturer Emma Bridgewater. The BGF’s head definitely a community that helps each other, and there of the Midlands Gurinder Sunner described are people on the periphery who are more competitive. the company (pictured above) as a quintessential We’d love more private equity houses here to be open British brand with “great e-commerce presence for business in the Midlands, because that creates a and international potential”. mindset and a flow for the adviser base to think about Founded in 1984, Emma Bridgewater designs equity as an option rather than debt. The more people and manufactures hand-decorated pottery and a “In the we have – up to a point – the better. We have very good wide selection of home products. Products are COVID-19 crisis relationships with the others who have a local handmade in a renovated 19th century factory in people have presence, and I think that’s the same with the adviser Stoke-on-Trent, in the heart of the historic checked up on base. It’s worth us all being nice to each other.” Potteries. Annual revenues have grown to more and looked out than £20m in 2019 with EBITDA of over £2m. for each other” As part of the deal, HSBC has also committed a Sarah Taylor, £2.5m debt facility, which, together with corporate finance BGF’s £8m investment, will support Emma partner, PwC Bridgewater’s continued growth in the UK, increasing capacity at its Staffordshire factory and allowing for exploration of international markets such as the US and China. The BGF used Freeths as legal advisers and Mazars for tax. Lexington Corporate Finance worked on the deal. Michelmores provided legal advice and Bishop Fleming tax advice for Emma Bridgewater. As part of the deal, the BGF introduced Colin Porter, former CEO of Right: Tata Joules, as non-executive chair. Technologies, Royal Leamington Spa

30 JULY/AUGUST 2020 CORPORATE FINANCIER WORLD TRAVELLER: FEATHERSTONE PEOPLE HAS WORKED IN COUNTRIES SUCH POWER AS HONG KONG AND PAKISTAN

DESIRE PATHS

Steph Featherstone, an M&A lawyer at Simmons & Simmons, talks to Jo Russell about her career and partnership ambitions

HOW DID YOU GET INTO expert in M&A and supporting could make the deal more efficient for CORPORATE LAW? clients with that specialism, rather everyone, while still acting in the best After studying law at Cambridge, I did than being a generalist. interests of your client. a vacation scheme at Linklaters and a I also co-led the negotiation for a mini pupillage at the criminal bar. I WHAT’S YOUR CURRENT ROLE? telecoms company acquiring a was set on being a barrister, but the I moved from Linklaters to the Bristol business in Pakistan, which involved criminal bar is difficult unless you office of Simmons & Simmons in multiple rounds of negotiations in have a lot of money behind you. September 2015. Currently, I’m a Islamabad. Aside from being the only I joined Linklaters in 2010 and started senior managing associate and female on the legal team, I found their in its corporate law team for the first I aspire to be promoted to partner way of operating quite aggressive. part of my training contract. I really in the near term. M&A is my core But I stayed calm, assertive and enjoyed the buzz of transactions practice area and about 80% of what measured, which paid dividends – and being client-facing. For the last I do. Simmons was looking at people listened. It taught me there is part of my training contract, I was establishing a corporate practice merit in sticking to your own style. seconded to the corporate team in here. It was quite a risky move at the Hong Kong. I did a lot of public time, as the office wasn’t fully WHAT WAS YOUR MOST markets work and was quite involved established, and there were just RECENT DEAL? as the team was smaller. It was a two partners. The acquisition of TI media, the UK fantastic experience. I then returned legacy business of Time Inc, on behalf to the corporate team in London. WHAT KEY LESSONS HAVE of Future Plc. Although signed in YOU LEARNED THROUGHOUT October 2019, the deal didn’t YOU ALSO WORKED FOR AN YOUR CAREER? complete until late April 2020 when IN-HOUSE M&A TEAM? At Linklaters I acted for the Electricity competition clearance came through. I was seconded to the M&A legal Supply Board of Ireland, which was During that time, COVID-19 had team at Novartis in Basel, Switzerland. selling power stations across Europe a significant impact on market I was supporting the in-house team to raise money for a government- conditions, which made things on a multibillion dollar portfolio backed dividend. On one deal, there challenging. We had to work our way transformation and focused on the was a senior associate on the other through the implications for both over-the-counter joint venture with side who was very collaborative – Future and the target business, in the GSK. I was less than three years this made the deal so productive. context of a contract signed when the qualified when I was seconded. It was I learned that by collaborating you pandemic was not anticipated. really challenging work in a high- pressure environment, but it was a WHAT ARE YOUR AMBITIONS? once-in-a-generation series of deals I would like to make partner, of and was an amazing experience. course, once we get through this The head of legal M&A said he crisis. At Simmons & Simmons we wasn’t sure I had “enough grey hairs” There’s a different skill have one UK corporate M&A practice for the role, but when I left he rang to to being an in-house with people sitting across the UK, but tell me I’d proved him wrong, which COVID-19 will change the way we was gratifying. M&A lawyer. You have work. I’ve spent a lot of time There’s a different skill to being an to be across all practice travelling to and from London in in-house M&A lawyer. You have to be particular. Perhaps using technology across all practice areas, and work areas, and work with means that where you are based with the business. I prefer being an the business won’t make such a difference.

ICAEW.COM/CFF 31 Begbies Traynor in 2016, having up to eight years. They run merger and worked for Grant Thornton and Kroll. market inquiries that have been referred Darren Mason (4) has joined as for investigation and make decisions on restructuring partner and head of regulatory appeals on price controls or CONNECTIONS pensions advisory in London, from Ross terms of licences. They are appointed Trustees, where he was CFO. He was based on ‘experience, ability and previously a partner in restructuring diversity of skills in competition and pensions advisory at Grant economics, law, finance and business’. Thornton, and before that worked The other new appointments are: at RBS and PwC. Jo Armstrong; Margot Daly; Ashleye Gunn; Jennie Holloway; Frances Kiren Asad has been promoted McLeman; Cyrus Mehta; Sir Kenneth to director at Deloitte, having Parker and Stephen Rose. Philippa Robinson (1) joined as associate director Armstrong is a business economist has joined Quantuma in March 2019 from London-based and corporate financier and has worked in 1 2 as director in its investment bank Strata Partners. In financial services (with RBS), oil and gas corporate finance 2016 she was presented with the (with BP) and the Scottish government. team in Southampton. outstanding achievement award given Holloway co-founded The Growth 3 4 Robinson trained as to the top-performing student in the Stage in 2018, which introduces an ACA at KPMG before joining its ICAEW’s Diploma for Corporate entrepreneurs to advisers and investors. corporate finance team. With more Finance. Before joining Strata, she She also co-founded Ekta Partners, than 20 years’ experience, she has also worked for KPMG in Pakistan. which raises finance for private worked for DHD Corporate Finance, businesses addressing environmental Meridian Corporate Finance, CW Business secretary Alok Sharma has and social challenges through Fellowes, WK Corporate Finance and announced nine appointments to the technology and innovation. Holloway finnCap – all as corporate finance Competition & Markets Authority worked in investment banking for director. In 2018, Robinson set up the panel, including Crispin Wright, a 15 years, until 2018, running Goldman M&A advisory firm Charlton Illingworth. former director general of the Takeover Sachs’ alternative equity capital markets Quantuma has also promoted head panel from 2015 to 2018. Prior to that, in EMEA team, and prior to that in of marketing Marie Wadeson (2) and Wright had a 33-year career in M&A as equity capital markets at HSBC. restructuring specialist Simon Campbell an investment banker with Rothschild, McLeman is a former corporate (3) to partner. Wadeson joined from Deutsche Bank and Morgan Grenfell. partner at Berwin Leighton Paisner FRP in 2016, having previously worked There are 30 panel members in total (now Bryan Cave Leighton Paisner) and for Mazars. Campbell joined from and they are appointed for a period of was head of Lloyds Banking Group’s

PE SHORTS

Tristan Alex Read has joined Martín was responsible London, from MPE the firm in 2007 from Craddock VGC Partners as for the development Partners in Boston. Mercapital, having has joined new investment and implementation previously worked for Palatine Private director from Alantra of corporate strategy Preferred Morgan Stanley in Equity as a partner in London, where he at Werfen. equity London. Clua joined in its investment was origination provider in 2015, having team in the south of associate. He started SwanCap 17Capital has recruited worked for Advent England. The team his career at Tullow Oil Partners, Dee Dee Sklar as a International and identifies investment as an associate. headquartered senior adviser in New Deloitte in London. opportunities for in Munich, has hired York from Cerebrus the private equity Keensight Ingo Stoff as an Capital Management. Tikehau firm’s £100m Impact Capital has investment director. Capital has Fund, which was 1 recruited He previously Miura Private 1 recruited launched in 2017. Dr Edwin worked for Allianz Equity in Domenico He has joined from Moses (1) Capital Partners. 1 Madrid has Paglia (1), Rutland Partners, 2 and José Luis promoted 2 Edoardo where he was Martín (2) as operating Sovereign Jordi Alegre Girelli (2) a partner. Prior to partners in Belgium Capital has 2 Sala (1) to and Damiano that, Craddock and Spain respectively. recruited managing partner and 3 Pedergnani worked in transaction Moses is a biopharma Charles Rossetti as an Fernando Clúa (2) to (3) to its Italian advisory at EY. entrepreneur, and investment director in partner. Sala joined investment team

32 JULY/AUGUST 2020 CORPORATE FINANCIER PHILIPPA ROBINSON HAS ALEX PATEY HAS JOINED PEOPLE BEEN APPOINTED AS A SPECTRUM CORPORATE FINANCE POWER DIRECTOR AT QUANTUMA AS A LEAD ADVISORY DIRECTOR

corporate and M&A legal team. Mehta Jens Lindqvist (1) and Brough managing director for over four years. is former head of the EU and Ransom (2) have joined Prior to that he spent eight years at competition team at CMS Cameron 1 Investec Investment Banking Deutsche Bank after roles at Merrill McKenna Nabarro Olswang. Rose is a & Securities from N+1 Singer, Lynch and Lazard. competition lawyer, who was previously where they worked in Phillip Hyman (3) has been promoted a partner at Slaughter & May and 2 healthcare sector research to managing director in the London Eversheds Sutherland. and sales respectively. Lindqvist is infrastructure team. He joined DC from a fully qualified medical doctor from HSBC in 2016 and prior to that worked Glenn Souter has joined Karolinska Institute in Sweden with at RBS. In the Frankfurt infrastructure Aldermore as a business 20 years’ capital markets experience team DC has promoted Moritz Müller development manager in its in London. Ransom previously worked (4) to managing director. Müller invoice finance team for London and for Merrill Lynch, ING and Nomura. previously worked in the infrastructure the South East, from Close Brothers. M&A teams of Dresdner Kleinwort He previously worked for Hitachi DC Advisory has and Commerzbank. Capital and HSBC. promoted Endong 1 2 Zhai (1) to managing Independent Growth Alex Patey has joined director in its London- Finance (IGF) has promoted Mike Spectrum Corporate Finance based Asia Access Fletcher to head of client portfolio. as a lead advisory director in 3 4 team. He leads He joined IGF in 2017 as ABL director London from BDO. He qualified as an China-related deal originations and in London from Chesney’s, where he ACA in 2012 while working at BDO as a execution. He joined DC from had been a contract manager. He corporate finance executive. He joined Deloitte in 2014. Andreas Kulcsar (2), previously worked for Shawbrook Clearwater International in 2013 as an has been promoted to executive Business Credit. assistant director before re-joining BDO director in the corporate finance team. as director focused on the lifestyle and He specialises in the consumer, leisure TheCityUK has appointed Emma wellbeing sector. and retail sectors and previously held Reynolds, the former Labour MP for corporate finance advisory roles at Wolverhampton North East, as Rob Armstrong has joined Lincoln International in Frankfurt and managing director for public affairs, Duff & Phelps as a managing Madrid, and at Commerzbank in policy and research. She was formerly director in its global Frankfurt and London. shadow secretary of state for restructuring practice in London, from The firm has recruited Andrew communities and local government, RSM’s special investigations team. He Congleton as managing director in shadow minister (housing) and has previously worked for Baker Tilly, its infrastructure team, from RBC shadow minister (foreign and Deloitte and Wilkins Kennedy. Capital Markets, where he was Commonwealth affairs).

LEGAL BRIEFS based in Milan, from its investment team, Deloitte closely with the Patrick Corr Rothschild, Intermonte from JP Morgan. Legal has Dentons Automotive (1) has joined and Goldman Sachs Niederstaetter is appointed team in relation to 1 Faegre respectively. responsible for leading Emily Foges, former credit facilities for Drinker’s the lower mid-market CEO of legal AI UK motor dealers. finance and Paris-based investment secondaries investor’s company Luminance She joined Dentons in 2 restructuring management firm due diligence Technologies, as lead 2011 from Kimbells practice in London as Andera Partners has process. She is also a partner for its legal (now Freeths), where partner, from Sidley. recruited Constance member of the firm’s managed service she trained as a lawyer. And in the US James Jay as director of investment committee. business. Foges F Conlan (2) has also investor relations, The firm has also previously worked for McDermott joined the finance and from Argos Wityu, recruited Alma Lawrie Equifax and Betfair. Will & restructuring practice. where she spent 11 to its investor relations 1 Emery has years. Prior to that she team. She was Dentons has hired Mark Morgan spent three years at previously a project promoted Fine (1) and Lewis has Acanthus Advisers consultant at Level20, Faye Garvey 2 Aymen 1 recruited in London. the not-for-profit to corporate partner Mahmoud (2) as Rob Mailer (1) organisation set up to in its Milton Keynes partners in its and Oliver Anne Niederstaetter increase gender office. She has London-based debt 2 Rochman (2), has joined Keyhaven diversity in European particular experience financing advisory from Morrison & Capital as partner in private equity. in the W&I insurance team, from Wilkie Farr Foerster, as partners in sector and works & Gallagher. its private funds team.

ICAEW.COM/CFF 33 LEGAL & GENERAL CAPITAL PEOPLE INVESTMENTS TOOK A 36% STAKE IN POWER THE KENSA GROUP IN APRIL 2020

ON MY CV FROM THE GROUND UP Completing a deal during lockdown was possible thanks to technology, a collaborative approach and motivated parties, says Grant Thornton’s Jon Stubbings

end of March, which was challenging. WHAT WAS LGC’S STRATEGY? It became even more challenging as LGC invests long-term capital into the WHAT IS THE DEAL? the COVID-19 situation intensified. evolving landscape of the energy Legal & General Capital Investments The deal completed in the first week of sector in order to mature technologies, (LGC) acquired a 36% stake in The April – two weeks into lockdown. We accelerate progress in the low-cost, Kensa Group, one of the UK’s largest were on site for the start of March, which low-carbon economy and reduce the ground source heat pump technology was very productive, and then worked cost of energy for consumers. LGC’s businesses. It was completed in April remotely. There were videoconference investment in Kensa complemented its 2020. Truro-based Kensa (founded in calls with the client and online team existing clean energy portfolio. Heating 1999) manufactures highly efficient and meetings to make sure all ideas were homes and providing hot water compact pumps eligible for the UK being bounced around. I led a team of contribute towards 25% of total energy government’s Renewable Heat Incentive four, writing the due diligence report. use and 15% of greenhouse emissions. and works with housing developers to If we hadn’t had the access at the start, it By 2025, the current UK consultation on design and install sustainable and would have been even more challenging. new building regulations will likely efficient heating systems. Its turnover outlaw fossil fuel systems in newbuilds. this year will be about £13m. THE CV Retrofitting gas and other fossil fuel systems in older homes represents WHAT WAS YOUR ROLE? Jon Stubbings is a transaction advisory a significant market opportunity. I led Grant Thornton’s financial due services director at Grant Thornton. diligence team, which was working for He joined the firm in 2006, after WHAT WERE THE CHALLENGES? qualifying as ACA with Peters Elworthy & LGC. We also provided them with tax We had to manage the due diligence Moore. His focus is on TMT and private due diligence, advice around the in line with the requirements of the equity. He is also a member of the enterprise-value-to-equity-value bridge, Corporate Financier editorial panel and business, and clearly the management sale-and-purchase agreement advice contributed to the AI in Corporate team was increasingly preoccupied and assistance on financial modelling. Advisory report published by the ICAEW through such a turbulent period. While in 2019 (co-authored by Corporate perfect datasets are nice, they rarely AND THE OTHER ADVISERS? Finance Faculty manager Shaun Beaney). occur in practice – we had to be Slaughter & May were LGC’s legal pragmatic and work with the data advisers. Kensa used Tozers on the Recent deals that existed in the business. legal side and PKF Francis Clark on the Sony on its investment in Whisper financial side. Kensa’s CFO Mel Adderley WERE ANY LESSONS LEARNED? Films in February 2020. was heavily involved. Commitment and collaboration were Legal & General on its investment in Pod Point in March 2019. essential in completing the deal without WHAT WERE THE TIMESCALES? Hargreaves Lansdown on the sale of compromising on quality. We had to Financial due diligence began at the end FundsLibrary to Broadridge Financial work around management’s day-to-day of February 2020. LGC and the vendors Solutions in the US in January 2020. responsibilities, while addressing the were keen to complete the deal by the areas our client needed to focus on.

34 JULY/AUGUST 2020 CORPORATE FINANCIER ICAEW KNOW-HOW

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