Top 50: hay in the sunshine

Accountants have taken advantage of the merger and acquisition boom of the
last year, as firms across the board booked double digit increases in corporate
finance fee income.

The combined revenues from corporate finance for the Top 50 firms rose to a
resounding £875.3m, an average rise of 26.2% on the previous year’s revenues.
These figures excluded the earnings of PwC, Vantis and Mazars who did not submit
separate corporate finance numbers. Their contribution would most certainly have
taken total revenues close to the £1.5bn threshold.

Frenetic activity in mergers and acquisitions and a raft of new listings on
the London markets has driven the buoyant sector. The attractiveness of the
regulatory regime of UK capital markets, British business’s push into the
emerging economies of China and India and foreign bidders’ acquisitions of UK
companies have all contributed to the rise in activity.

Whether advising buyers, sellers or newly listed groups, accountants have
been at the forefront of this busy period. Revenues have not been concentrated
at the Big Four level either. Smaller practices like Berg Kaprow Lewis and Unity
Business Services have all enjoyed the benefits of this bumper harvest.

KPMG’s corporate finance income grew the fastest among the Big Four, at £262m
– a 25% increase on the previous year. In the mid tier PKF and Moore Stephens
were the stars, with growth of 25% and 48% to £8.6m and £3.2m respectively.

But it was the smaller firms that generated the most spectacular growth. CLB
Littlejohn Fraser’s corporate finance division grew by 275% to £1.5m, while Berg
Kaprow Lewis grew by 50% to £0.3m, and Lovewell Blake boosted revenues by 75% to
£0.7m.

Mark Ling, head of corporate finance at CLB Littlejohn Fraser, says the
strong growth in corporate finance at smaller firms reflected a desire among
businesses for personal attention and partner contact.

‘One of the key elements of our offering is that we offer closer involvement
with the actual partners. We work very hard to retain clients and we like to
work with growing businesses. Every client is important and we provide a very
high level of service,’ Ling says.

High profile corporate finance experts, however, have warned that the good
times could be coming to an end. Stock markets have dipped, which will see a
drop in work on initial public offerings.

Jon Moulton, head of venture capitalists Alchemy Partners, forecasts that a
correction in the debt markets, the main source of funding for M&A deals, is
almost certain. ‘The leveraged debt markets are very extended. A collapse,
driven by the fragile market players, such as hedge funds, is likely,’ Moulton
says.

Richard Metcalfe, a partner at Mazars, feels a change in market conditions
could affect activity, but was unlikely to see work grind to a complete halt.
‘The appetite is still there, but there could be less money available and
dealmakers are going to have to do better deals and prepare for a lower level of
return,’ he says. The time of easy money may be fading fast.