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US keen on Scottish ecosystem

Deals activity holds up despite uncertainty over Brexit

Mark Ellis

Mark Ellis: US investors are impressed by Scottish community


 

Deal activity and investment in Scotland have remained buoyant despite the uncertainty caused by Brexit and other international tensions, according to a corporate lawyer at Burness Paull.

Mark Ellis, who heads up the firm’s corporate finance team, said Brexit and concerns about the medium and long term economic prospects has not had any meaningful impact on the mergers and acquisitions market. As an indication of overall confidence in investment levels he expects a number of firms to issue shares on public markets this year.

“More relevant factors have been the continued growth and development of ambitious scalable Scottish businesses; the relative weakness of sterling; the cash resources of significant corporates; and the significant amount of private equity cash available for investment,” he said. “The tech and fintech sectors remain very active – with lots of fundraising activity taking place.”

He added that the funding environment remained supportive of growing companies and that US investors were particularly impressed by the investment climate in Scotland, partly because of the strong supporting network.

“Scotland has a strong venture capital and angel investment community. Investors are regularly collaborating and investing together on deals to enable bigger overall equity cheques to be written and deals to be completed which would not otherwise happen,” he said.

“This form of investor support continues to be hugely important in providing growth funding to ambitious Scottish companies.




“Indeed, we recently met with North American investors who commented on how impressed they were by the Scottish investment landscape, and compared it very favourably to the position in many parts of the USA.”

Alternative lenders have also become increasingly prominent in the market, and can offer interesting funding solutions in relation to growth and M&A activity. LendingCrowd announced it had lent £14m in the first half of the year.

Private equity backed companies undertaking bolt-on acquisitions have represented a very definite route to an exit for owner managed businesses, particularly those generating earnings in the £1m – £4m range.

There has been a significant upturn in activity in the oil and gas sector. While the oil price has not necessarily increased in the manner that was hoped, Mr Ellis believes there is a greater degree of certainty and oil and gas contractors are make strategic acquisitions leading to consolidation in the services sector.

In parallel the restructuring of the UK continental shelf assets has continued to gather pace, with a number of independents acquiring E&P assets from the larger players.

“2018 was generally a positive year in terms of Scottish corporates raising funds on public markets, and our capital markets team have been kept busy.

“Market volatility towards the end of the year resulted in a lull in IPO activity, but there appears to be a continuing appetite for raising funds and there are a number of ambitious Scottish companies which should hopefully come to market during the course of 2019.”

 



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