TOP 50: Corporate financiers hit by downturn

The heads of corporate finance in the large practices have argued that they have been ‘realigning’ their businesses to better serve their clients, but the reality is that they have seen a slowdown in work, especially in the large ticket mergers and acquisitions marketplace, and flotations.

That said, fee income is still on the up for most of the big players, though two firms, Ernst & Young and Deloitte & Touche wrapped their income up with their insolvency work which has inevitably boosted their figures.

However, KPMG does produce separate figures and showed a healthy 9% increase on the year.

But the mid-tier would appear to have struggled – PKF’s income from corporate finance related activity fell 10% during the year to £6.6m, due to the drop off in M&A activity. Likewise Grant Thornton fell 4% to £22m, and Baker Tilly dropped a similar proportion to £12.4m.

The only mid-tier firm to seriously buck the trend was BDO Stoy Hayward – which posted a 24% increase to £27.1m.

But this figure relates to the firm’s 2000/2001 results. ‘It’s not been as strong a year,’ admits BDO partner Peter Hemmington. ‘Deals are getting done at sensible prices, but the tech deals just aren’t happening. It’s a tough market.’

This is no more so obvious than in the IPO market – BDO was only involved in four floats in the last six months, compared to 24 a year ago.

But public to private deals still continue apace, and trade sales are helping to keep the corporate finance teams busy – Hemmington for one is determined to keep his own team together. But corporate recovery, on the other hand, has continued to grow, reflecting the economic downturn that hit UK plc in the last 12 months.

Insolvency figures grew as companies collapsed, hitting the downtrodden manufacturing sector in particular.

There were more than 44,700 insolvencies – corporate and personal – recorded by the Department of Trade and Industry during 2001. The fourth quarter of 2001 saw a particular increase in insolvency figures, up 1.8% on the previous quarter and 2.6% fourth quarter of 2000.

The collapse of Cammell Laird and the highly controversial decision over the administration of Railtrack were events that marked the insolvency world and had an impact on figures.

KPMG may again lead the way with #72.9m earned from this sector – though the firm’s rivals do not provide complete breakdowns. Mike Blake, chief operating officer of KPMG’s business recovery service, explains the growth was due to the firm’s reputation, its wide range of services and its strong representation.

He says: ‘Our growth came from a combination of the big headline hitting cases, our very strong market representation and the way our resources are deployed nationally.’

The firm has taken on four new corporate recovery partners and a number of staff in response to growing demand.

Chantrey Vellacott is one of the smaller firms, but it has shown the highest percentage of growth in the past year, increasing its income generated from insolvency work to £3m, or 50% on last year.

But on the downside, the biggest drop was seen by CLB, which made just £300,000 from this line of work, down 11.7%. Again, though, some of its mid-tier rivals are regrettably circumspect about divulging full breakdowns.

And PKF, which had experienced growth last year, saw a decline of 8%.

Philip Long, head of corporate recovery at the mid-tier firm explains: ‘We had a very slow start to the year but we found the second half picked up and we think it will continue to pick up in the next year.’

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