Deal flow focus shifts to follow-up funding

Euan Tripp: ‘there is a steady flow of follow-up finance’

Law firm Anderson Strathern says the focus of corporate investment has shifted to follow-up finance for existing clients as the climate for new companies becomes more competitive.

In a record first quarter, the firm’s clients invested 58.8% more in the first quarter of 2023, when compared to the same three months last year.

The number of deals completed has also rocketed, more than tripling compared to the first quarter of 2022, due to increased instructions from both existing and new clients.

The team had its best year to date in 2022, having been involved in more than 25 investments with an aggregate value of more than £20m.

Euan Tripp, partner and a leader of the corporate investment team, said: “After a phenomenal 2022, we predicted that the healthy Scottish investment scene would continue in 2023, and these forecasts have become reality, with a record-breaking first quarter for the firm which has seen an exceptional number of deals.

“There is no doubt that the investment world has become more competitive – in respect of deals involving new companies – but there is a steady flow of follow-up finance into existing portfolio companies.

“We have also noted an increased interest from south of the border in Scottish companies.”

Other advisers have noted a more competitive environment in which investors have become more cautious, particularly around lending.

Harry Linklater of HNH in Edinburgh told Daily Business last month: “There have been signs that sentiment in the UK M&A market has become more cautious as access to debt has become tighter.

“There’s also a stronger focus on value and growth strategy with earnings outlook and cash generation a priority as we move towards greater economic headwinds.”

Last year the firm advised on 23 deal completions in 12 sectors with a total value of more than £200m for the second consecutive year.

Max Scharbert, a senior director at Anderson Strathern, believes changes to the Seed Enterprise Investment Scheme coming into effect on 6 April will drive further activity.

The scheme, introduced in 2012, allows investors a 50% deduction of their investment against their income tax.

Changes designed to allow startups to raise more funding include an increase in the ceiling from £150,000 top £250,000 and an extension of the qualifying period from two years to three.

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