Amidst a dynamic and volatile market, we are finding our clients wanting to understand market intelligence more quickly and efficiently than ever before. This will enable them to inform their own views and to navigate and plot the best outcome for their companies.

With this in mind, we have produced a focused overview of topics which are front of mind for clients across our business.

Key takeaways

  • Despite seeing the first set of restrictions easing on 12 April, there is still a long way to go until business as usual. Clients are planning a strong exit from lockdown after observing plenty of opportunities to bounce back.
  • ESG continues to gather momentum across the board. Businesses are beginning to set plans as they become more ESG aware. ESG-focussed companies are even enjoying a premium valuation as sentiment shifts positively for this important issue.
  • As the economy sits on the shoulder period between lockdown and “normality”, businesses are starting to question their operational approach to working. Many will be looking to utilise the innovative methods that made them successful during the working from home period and combining it with the benefits of working from an office.

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Advisory & Corporate Broking

Ben Farrow

Private Companies

Tangwena Nelson

Risk management

Aaron Jones, Seb Wright, Callum Macpherson

Lending

Helen Lucas

Advisory & Corporate Broking

It has certainly been an interesting month with a few key topics on the lips of our clients.

 
We recently saw the first stage of lockdown easing. On 12 April, non-essential retail, gyms and pub outdoor areas reopened to the public. This prompted a number of conversations on what the future may look like for consumers and retail sectors, many of whom have seen a strong resurgence. But our clients have been focusing predominantly on the impact on liquidity as we move into a post-pandemic world. With the hangover of Brexit and Covid-19 finally beginning to subside, our clients are also planning a strong exit from lockdown. Investors are keen to start investing some of the funding they have earmarked for post lockdown conditions, there’s certainly capital available for the right opportunity.
 
Additionally, I am starting to sense a reinvigorated focus on ESG from both institutions and businesses. In most client and investor meetings, the conversation has shifted towards the topic. The questions always centre around “how is your company planning to adapt to become more ESG aware?” Businesses who have answered this question with a thought-through approach have, on the whole, received much more positive feedback. Such is the importance of this, we are starting to see an ESG-premium on some valuations. Anecdotally, investors can expect to pay a premium in the region of 20-30% for a well-structured, ESG focussed company.

Finally, the IPO pipeline has never been so busy, a great prospect for the London Stock Exchange (LSE). There have been attention-grabbing headlines surrounding special purpose acquisition companies in the US (SPACs), but is it the best use of investor funds? The LSE argues not. Seeing the size of the returns coming from the UK IPO market, it’s hard to look further than the LSE at the moment! Investors have been waiting for three years effectively to get involved, as Brexit and then Covid restricted activity. So now we’re seeing this pent-up demand unleashed in the space of the last 12 months. This trend looks set to continue as well, in part due to the amount of cost-effective capital available to investors. The next wave of IPOs certainly looks fantastic and may prove to be an exciting area to watch.

 
Ben Farrow

Private Companies

This month, most clients are debating what the new normal will look like and how to adjust to it.

 
Recently we have seen the first stage of lockdown easing with non-essential retail, gyms and pub gardens opening up. Clients are looking forward to things picking up again and seeing their businesses gradually recover. We’re still a little way off pre-pandemic levels, but the level of adaptation we have seen is admirable.
 
Businesses are looking to continue all the best traits of pandemic-induced operations in the new normal. Companies are starting to assess how they can adopt a hybrid operation by capitalising on working from home successes like digital innovation and combining it with the benefits of working from the office, which provides the foundations for the practice of company culture. There is still some thinking, and no doubt trial and error, needed to be done, but it appears that many businesses will not be operating in the same way they did pre-pandemic.

Lastly, a few questions are knocking around on what the long-term baseline will look like. The changes in spending habits and alterations in business operations have made the baseline particularly difficult to establish. As activity ebbs and flows in the next few months, it seems like that line will not be at a reasonably consistent level for a while.

 
Tangwena Nelson

Risk management

Following the “Index Cessation Event” in March, we are starting to see new GBP transactions moving to SONIA. That said, the derivative markets are still working through transitioning products to RFRs, meaning not everything that was possible on LIBOR is immediately available on SONIA. For USD, LIBOR will be available for longer and we are yet to see new deals moving to SOFR.

 
The US dollar has weakened throughout April. This is leading some USD denominated fund managers to consider hedging of their non-USD portfolio holdings. This had been relatively low down on the agenda given how busy managers have been with year-end reporting and closing deals in Q1. But we are now seeing this coming back onto the radar.

When it comes to commodities, I think clients are finding it harder to judge where the energy markets and their own demand is going over the summer. On the one hand, vaccines seem to be effective in bringing down cases where they are being rolled out on scale, but this is only happening in a handful of places and outbreaks are growing elsewhere. Clients are finding it increasingly difficult to judge and plan accordingly.

 
Aaron Jones, Seb Wright, Callum Macpherson

Lending

April has brought us lots of good things; chocolate eggs, lambs, schools and sunshine, as well as lots of deal flow. And while clients are continuously developing their "return to normal" plans and working practices, the deal flow has remained robust, giving us plenty of other things to spend our time on.

 
There is a feeling that change is in the (warmer) air. Attentions are starting to pivot from not just safe-haven sectors. There has also been an increased interest in assets that can prove a return to form and justify adjustments. This can feel more like art than science at times. But for those clients that have tracked those assets closely, there may be pricing advantages to moving early. In some cases, it may be downward adjustments to “Covid bounce” where the pandemic has forced behavioural changes that we may not believe are sustainable, whether that’s banana bread baking or home fitness. It’s this debate that provides the intellectual challenge we all thrive on. Many of the unknowns will become clearer as government support schemes start to run off and a free market starts to reveal itself.

Whether we will all be in the office next month or embracing change through more flexible working patterns, there is a real split becoming evident and it will be interesting to see this evolve. I personally believe we have an opportunity to create a modern hybrid model that marries the face to face collaboration of the past with technology-enabled flexibility that appeals to a more diverse talent pool. Whatever the eventual outcome on this point, client relationships and creativity remain central to success.

 
Helen Lucas

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Jonathan Arrowsmith

Head of Advisory & Co-Head of Private Equity

Get in touch to find out how I can help your business.

Callum Bell

Head of Lending & Co-Head of Private Equity

Aaron Jones

Head of Risk Solutions

Richard Holm

Head of Private Companies Client Group

Andrew Peck

Head of Listed Companies Client Group