A spike behind Johnston Carmichael’s “record” year in Corporate Finance
“We saw a wide range of transactions across a range of industries. We have a good mix of sectors given the size of our business and we’re not too reliant on any one industry,” shares Graham Alexander, partner and head of corporate finance at Johnston Carmichael. As Scotland’s largest independent accountancy and business advisory firm, Johnston Carmichael has helped close deals worth over £300m in the UK and overseas in 2021, as global mergers and acquisitions “hit new heights” last year, with tech companies playing their part in the push.
“Throughout our business, there is such a concentration and volume of entrepreneurs developing technology. It’s only natural that this has become quite a large part of our business and our customer base,” Alexander notes. says there is a “rapid pace of technology development” in the UK and the rest of the world, and one of the main ways Johnston Carmichael has implemented technology within the company is through adopting IT and software to modernize its business advisory team to digitize client accounting.The company’s audit department has moved much more online with the adoption of a cloud-based approach and Alexander believes that ultimately the ability to communicate and work remotely is the “biggest part” of why performance throughout the pandemic has been “relatively strong.”
“We have a history of working in the technology sector and we have always had a very strong oil and gas presence. If you put the two together, we are now seeing an awful lot of technology being delivered in the net zero program,” Alexander reveals. As such, the company is currently working with companies looking to develop the technologies that can accelerate the adoption of net zero, from planting trees all the way to the capture and storage of carbon, and the engineering design and planning that goes along with that. .
In total, the number of deals announced topped 62,000 globally last year, an unprecedented 24% up on 2020, but how did Johnston Carmichael witness it? The company focuses on four key sectors in particular: energy, infrastructure and sustainability (EIS), technology, food and beverage and financial services. “Our industry focus, company size, corporate brand, and the strength and depth of the corporate finance team have allowed us to benefit from a fairly active deal market throughout the year. last,” reveals Alexander. The market picked up last year especially as there was a “brief pause” once the pandemic hit. However, from June 2020 the company saw a “significant increase” in transaction activity as restrictions eased across the UK.
Alexander explains, “You have cash-based businesses and private investors looking to invest. With the pause in the global economy, there was pent-up demand which subsequently dissipated. Additionally, the economic outlook is “changing” as the market is increasingly driven by rising inflation levels as well as the current crisis in Ukraine. With that in mind, there were inevitably elements of the business that were less busy than Johnston Carmichael anticipated.
Alexander points out: “Across the UK, our insolvency restructuring team was not as busy as people might have expected, largely due to the variety of government support measures, such than the furlough scheme, the Coronavirus Business Interruption Loan Scheme (CBILS), soft bank loans and various smaller grants, all put in place to help businesses trade through Covid.
According to the Insolvency Service, the total number of business insolvencies recorded in 2021 was 14,048, remaining below pre-pandemic levels although higher than the 12,634 business insolvencies recorded in 2020. All other types of business insolvencies were also below both 2020 and pre-pandemic levels, and the annual number of compulsory liquidations last year was the lowest since the series began in 1960. Alexander note: “Perversely, you might have thought that there would be enormously more business bankruptcies, layoffs and Covid unemployment, but we have seen the opposite.
But what exactly did the company do differently last year? Johnston Carmichael added other specialties to the business, as well as expanding the firm’s London office, to further contribute to the company’s success; for example, it invested “deeper” in its financial services department. Although he has always been part of the business, Johnston Carmichael has “grown and developed” its financial services focus to expand its presence in London and be “at the heart of this sector”.
“People are more and more important, and the last two or three years have underlined that,” adds Alexander. Focusing on growing and developing the company’s existing people, alongside recruitment and retention, has also been critical for the wider business, as “part of the uptick in activity over the last two years has meant that it has been difficult to find the right people”, which has been observed in all industries. “So doubling down on training, development and recruiting has been a big part of our success,” says Alexander.
Currently, inflation is the “biggest threat” to Johnston Carmichael and its customers’ businesses, as rising energy costs mean people’s pockets will be tight. Ultimately, Alexander predicts this will slow the economy, presenting the “biggest potential drag” on activity over the next year and beyond. “If you look towards the end of this year, it will start to have more impact depending on how long it persists,” says Alexander. He adds: “The situation in Ukraine has created some nervousness about investing in anything with Russian ties. We have yet to see a large amount of effect from this, but the longer the problem persists, the easier the ripple effect and impact will be to see in a tangible way, and it will have an effect on our business .
With that in mind, Alexander recommends that to adapt to the changing economic landscape, businesses should “start planning as early as possible and refresh regularly.” This includes performing a SWOT analysis looking at the strengths and weaknesses of the business and identifying potential opportunities in the market. He says, “It’s never a one-time exercise. The last two or three years have shown that it’s a very unpredictable world, so early engagement and having a broad team with a range of skills and experience helps businesses operate more efficiently and prepare to uncertainty.
Additionally, the company continues to build on its success through the rollout of its JC Academy to invest in learning and development opportunities for its staff and has also joined Moore Global to access its international learning resources. . Alexander believes the company’s membership of Moore Global will enable Johnston Carmichael to “continue the pursuit of technology and efficiency in terms of how we do business and how we can then effectively advise clients” in the goal of achieving global internationalization, as the firm now has access to associate firms in Europe, South America, North America and Southeast Asia through the network. “We can do business and help our customers do business by working through this network, so it’s a key part of our strategy that goes beyond the UK,” concludes Alexander.
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