The Top 50 - Corporate finance shines, but clouds are gathering

There has been double digit growth in corporate finance but the impact of the credit crunch has yet to make its way onto the books

Written by David Jetuah

Accountancy Age, 10 Jun 2008

Accountancy firms posted double-digit growth yet again in their combined corporate finance revenues, growing at a rate of 13%, according to our Top 50 analysis.

However, the firms’ figures do not take the credit crunch into account as they have only posted their 2007 year-ends. The growth figure therefore belies future prospects for the sector, where some firms are already beginning to cut jobs.

‘I think [a drop-off in work] is already happening,’ says David Brooks, corporate finance partner at Grant Thornton. ‘Mid-market deals are taking longer and more of them are falling down before they reach completion.’

The firms posted £1.1bn in corporate finance revenues for the year to 2008, compared with £1.02bn the year before.

Although the economic outlook for the sector has dipped significantly since last summer, the period between 2006 and 2007 was ‘buoyant, with lots of activity’.

John Cole, partner at E&Y, says: ‘The principal driver is deal activity and it was a buoyant time. Volume and value rose during that period, which would have driven revenues.’

The figures have had to be adjusted because not all the Top 50 firms, including PricewaterhouseCoopers, provided corporate finance breakdowns. Deloitte submitted the same numbers for this year’s study as last year’s, so a parallel set of numbers excluding the firm was also generated, throwing up the positive results.

But for all the optimistic noises being made, the sector is expected to face choppier waters, if KPMG’s shedding of 90 jobs in its corporate finance arm is any barometer for the wider market.

Cole says: ‘There has been a slowdown in mergers and acquisitions. Apart from in some sectors such as mining, there hasn’t been a lot of activity.’

Brooks adds: 'I don’t think you will see much improvement until Q2 next year.’

Consultancy divisions pulled in less cash than their peers in corporate finance but did even better in terms of combined percentage growth, recording an 18.6% increase after Deloitte’s exclusion, marking a rise to £928m from £786m last year.