Newcastle-based Ryecroft Glenton Corporate Finance (RGCF) has recorded one of its most successful years to date, based on deal volumes and fees generated.
In the 12 months to 31 August 2016, RGCF advised on more than 20 high-profile transactions for clients across the UK, which have involved private-equity-backed, UK-listed and overseas-listed businesses.
“We have had an extremely productive 12 months, which reinforces our position as an active mid-market corporate finance advisory firm,” says Carl Swansbury, partner at Ryecroft Glenton Corporate Finance.
He adds: “We’ve built a strong team at RGCF, which has enabled us to form close relationships with a large number of growing and established businesses across a variety of sectors throughout the UK.”
Among its high-profile transactions was the £17.1 million inward investment made by Japanese-listed Trust Tech Inc. Its acquisition of MTrec Ltd, one of the North East’s leading providers of staffing and training solutions, was named as the September 2016 ‘Deal of The Month’ in a respected corporate finance business publication.
The acquisition was Trust Tech Inc’s first strategic acquisition in Europe and will provide a foundation for further acquisitions on the Continent. The company plans to work closely with MTrec’s existing management team to create a truly global staffing and training solution by bringing together their collective resources, expertise and experience.
Carl explains the significance of this transaction in the context of the UK’s current economic and political landscape:
“The acquisition of MTrec by Trust Tech Inc is a good example of a transaction that not only highlights foreign interest in acquiring UK companies, but also demonstrates confidence in the UK as still being a good place to do business despite Brexit.”
He continues: “The fall in the value of the Pound against currencies such as the Dollar and the Yen presents real opportunities for UK exporters and for overseas trade buyers who may be looking to purchase UK assets.
“While there was some initial turbulence in the immediate wake of the EU Referendum, the economy, for the moment, has stabilised and, in some areas, experienced growth.”
Carl’s view is supported by recent predictions by the National Institute of Economic Research (NIESR) that reported expected UK GDP growth of 1.7 per cent this year, which he says has been reflected by economic activity in the North East.
This follows research from Lloyds Bank that found companies in the region have reported the biggest increase in business activity in more than a year.
The NIESR research projects GDP growth in the region of around 1.7 per cent for 2016, revised slightly down from 1.9 per cent projected in May, and though growth is expected to decelerate in all regions in 2017, the North East is not expected to go into recession as the UK begins to feel the effects of the vote to leave the EU.
The report also forecasts the North East to have the third highest rise in employment next year, behind London and Yorkshire.
“A reduction in business investment is likely to be one of the main reasons for any slowdown in GDP growth next year, driven largely by the uncertainty of the UK’s future trading relationships with the EU,” explains Carl.
“Conversely, we expect Brexit to exert a long, slow drag on growth, rather than giving the economy a short, sharp shock.”
As a result, Carl suggests that businesses should therefore not be complacent about the impact of Brexit just because the initial effect has been less negative than some had expected.
However, he points out that “this also gives companies more time to adjust their strategies to mitigate the risks associated with leaving the EU, while also seizing the opportunities that exist in the world beyond Europe”.
Peter Glenton, partner at Ryecroft Glenton, reflects: “A key influencer of UK business confidence, both directly as evidence of the profitability of UK plc and indirectly from a psychological perspective, is the performance of the UK’s listed companies. Since the EU referendum, the FTSE 100 has been in the headlines, showing a stellar rise of over 15 per cent between the end of June and the end of October.”
However, Peter points out that a better indicator of the potential impact of Brexit on the British economy is the FTSE 250, which comprises the next 250 largest listed companies in the UK after the FTSE 100, and the AIM Index of the UK’s smaller listed companies.
“The reality is that most of the companies listed on the FTSE 100 derive all or most of their earnings from overseas and therefore much of this rise is a direct consequence of the impact of the large devaluation in the Pound against the US Dollar due to the one-off foreign exchange gain,” he says.
“The companies listed on the FTSE 250 and AIM indices are mostly British-based businesses, with a material exposure to the UK economy. The FTSE 250’s performance has lagged behind the FTSE 100 but, very encouragingly, the AIM market’s performance has been extremely good.”
Commenting on the business landscape in the region, Carl says: “The North East is home to a host of well-run, agile businesses, ranging from technology start-ups to family-owned companies, operating in a range of sectors, and selling into markets across the globe.
“The region is also the chosen UK location for a number of multinational businesses, such as Nissan.
“We have, arguably, a more diversified business market than many other regions in the UK and one that will, hopefully, be able and willing to take full advantage of the opportunities that will no doubt arise in the next few years.”
While 2016 was the year of the referendum, 2017 is expected to see the triggering of Article 50 and, potentially, a timeframe for exiting the EU.
As a result, many UK businesses may go into ‘wait and see’ mode and postpone investment until they understand exactly what Brexit means to them, their customers and suppliers.
But Carl says that while some businesses press pause, others will seize the moment: “As the saying goes, fortune favours the brave and Brexit-induced indecision on the part of some businesses will open up opportunities for those willing to take a calculated risk.”