Completing the Deal: How Blockchain, Transparency and Brexit Impacts M&A
We hear from Adam Stronach who comments on ICOs, IPR and the opportunities that lie ahead for investors, the importance of transparency in transactions and how Brexit may impact the M&A field.
What benefits and opportunities do you think lie in the current state of the investment sphere?
Initial Coin Offerings are an area to watch in the coming years. ICOs are being considered more and more, especially by technology companies developing suitable products linked to the blockchain. For example, a company can raise funds in return for tokens, which are a tradeable commodity in their own right and which typically also allow the holder to access and use the product being developed.
In addition, companies with strong intellectual property will remain attractive to investors and trade buyers, even in uncertain times. If you own valuable IP and have a business which is not just surviving but thriving from exploiting that IP, then whatever your size – OMB, SME or larger – there will be people interested in tapping into the IP or acquiring it.
In an uncertain period, what are the risks associated with the transaction process and how important is transparency?
Looking for the risk points in transactions is a dynamic process. It begins from the initial conversation with clients through to closing.
In the OMB and SME space, the biggest risk boils down to expectations: buyers not getting what they thought they were acquiring, and sellers being disappointed if buyers start deviating significantly from the initial terms offered. It can be a rollercoaster ride, particularly for clients who have not been through an M&A transaction before.
As the UK gets closer to leaving, I anticipate there will be a hiatus in M&A activity.
The aim is for no surprises for either side. It is about planning well in advance of a transaction, having honest conversations, identifying issues that might affect a deal later on, and for OMBs and SMEs being transparent about their strengths and weaknesses.
My experience is that deals become problematic when client-specific risks are misunderstood or not well articulated at the outset, so getting to grips early on with ‘skeletons in the cupboard’ that might affect a particular deal is key to keeping the transaction on track.
In terms of the future in M&A and investment, what is the biggest change or development you are looking forward to in 2019?
Brexit is perhaps so obvious that maybe it’s boring to mention. Business has done a great job of staying focused on wealth creation while the details of the political settlement are worked through. But as the UK gets closer to leaving, I anticipate there will be a hiatus in M&A activity. So I am looking forward to getting it over with and finding we haven’t fallen off a cliff.
I am concerned about the Government’s attitude to risk-taking and entrepreneurship, and it will be interesting to see whether at the margins there is a stifling of M&A activity in the OMB and SME sector from recent changes to Entrepreneurs’ Relief announced in the Budget, which may have an impact on those holding alphabet or growth shares in particular.
Harwood Hutton Advisory Services LLP
Adam leads Harwood Hutton’s forensic and corporate finance team and has been recognised with a series of major national awards in both fields in the past two years, including Lawyer Monthly’s Expert Witness of the Year Award 2017.
Adam and his team are experts in valuing unquoted equity and shares and are often called upon to produce business valuation reports, whether for commercial, forensic or taxation purposes.
The corporate finance offering encompasses advisory and transactional assignments, from sale mandates for clients looking to exit to assisting clients seeking external funding and leading financial due diligence work for clients on acquisition trails. Forensic assignments include expert witness work, expert advisory work, accounting investigations and expert determinations. Adam has given oral evidence at the High Court and at the family court.