16 SCOTTISH LEGAL REVIEW THURSDAY 12 NOVEMBER 2009 THE SCOTSMAN
CORPORATE FINANCE
I'm quite
optimistic
but, even
so, one is
looking at a
very patchy
landscape
Workisgoingonbehindthescenesinreadinessfor
the next round of transactions, writes Garth Wood
GRAVE CONCERNS
SLOWLY GIVE WAY
TO SIGNS OF LIFE
CORPORATE / M&A
CORPORATE FINANCE:
EDINBURGH & GLASGOW
1 Dickson Minto
1 Dundas & Wilson
1 Maclay Murray & Spens
2 McGrigors
2 Sheppherd & Wedderburn
3 DLA Piper Scotland
1 Brodies
1 Maclay Murray & Spens
2 Dickson Minto
2 Dundas & Wilson
2 McGrigors
2 Shepherd & Wedderburn
TAX
1 Paull & Williamsons
2 Ledingham Chalmers
2 Maclay Murray & Spens
2 McGrigors
2 Stronachs
3 Blackadders
3 CMS Cameron McKenna
3 Harper Macleod
3 Raeburn Christie Clark &
Wallace
3 Shepherd & Wedderburn
3 The Commercial Law
Practice
3 Thorntons Law
REST OF SCOTLAND
1 Maclay Murray & Spens
2 MacRoberts
2 McGrigors
3 Biggart Baillie
3 Brodies
3 Burness
3 Dundas & Wilson
3 Shepherd & Wedderburn
CORPORATE TAX
1 Dickson Minto
1 Dundas & Wilson
1 Maclay Murray & Spens
1 Shepherd & Wedderburn
2 Burness
2 DLA Piper Scotland
2 McGrigors
3 MacRoberts
3 Paull & Williamsons
I
F THERE is one lesson everyone
involved in corporate finance has
taken from the last 18 months, it is a
clear sense of the near impossibility
of doing corporate transactions in the
middleofamassivecreditcrunch.Justas
construction teams in legal practices
havebeenabletooffsetthedryingupof
new projects through a sharp increase
in contentious work, corporate finance
departmentshavebeenabletoredeploy
some team members on restructuring
and troubleshooting. However, the
work involved in restructuring is a long
wayshortofmakingupforthebigticket
earningpowerofbigdeals.
There have been deals, some of them
quite sizeable, the recent �170 million
sale of Viking Moorings and the sale of
Wood Mackenzie being cases in point.
However, Kenneth Shand, corporate
partner at Maclay Murray and Spens,
says that the current period can be
likened to an iceberg, with nine-tenths
of activity going on "beneath the
surface" out of the public eye. The big
hope for everyone, Shand says, is that
the work now going on behind the
scenes to tidy up companies and get
them financially fit again will lead to
dealsinthenearfuture.
"The theme right now is much more
about cautious rebalancing and
preparatory activity. It is very unglam-
orous and behind-the-scenes work, but
it is a step on the way to deal-making,
hopefully, and could be consistent with
the signs that a pick up in the deal
marketmightbeimminent,"hesays.
Viewed like this, the silence in the
marketcouldbeseenoptimisticallyasa
sign of activity, and quite consistent
withothersignsthatageneralpickupin
theUKeconomycouldbeimminent.
Of course, not every corporate trans-
action requires a substantial input of
senior debt from participating banks.
Tradebuyers,whichistosay,companies
with sufficient cash on their balance
sheets, sometimes have enough
resource to do a deal without bank
lending at all. Moreover, any company
with that strong a balance sheet will be
attractive to banks even in the current
tightlendingmarket.
Shand says there have been a few of
thesedealsdoneinrecentmonths."One
of our clients, DCC, an Irish headquar-
tered and listed company, has made
several acquisitions through the down-
turn. We have been active for their oil
distribution business, which has
concluded several transactions across
ScotlandandEngland,"hesays.
Inevitably, as the UK struggles to
come out of recession, there are mixed
messages out there in the market. "One
ofthemoreconfusingfactorsforpeople
is that the stock market appears to be
gainingdaybyday,yetthecrisispersists
and there is constant talk of a possible
double dip recession. This feeds
uncertainty over pricing," Shand says.
"There is no doubt that this is a slightly
strange period that we are going
through, while the market tries to work
outwhatalltheindicatorsreallymean."
Another big source of uncertainty is
the looming threat of elections in the
UK. "Even the likelihood of a Conserva-
tive victory leaves no clear roadmap of
where the economy is going, so that is
stillmoreuncertaintyinthemix,"Shand
says.InScottishterms,theSNP'sopposi-
tiontothePublicFinanceInitiative,and
its slowness in working out what to do
about PFI-type deals, is generating
furtherfogforthemarkets.
"Iamgenerallyquiteoptimisticabout
the prospects for deal-making as we go
into2010but,evenso,oneisleftlooking
ataverypatchylandscape.Therewillbe
opportunities for some, particularly for
those companies with strong balance
sheets,andweexpecttoseesomeactivi-
tyinthemonthsahead,"Shandadds.
James Will, head of corporate at
Shepherd and Wedderburn, says that
thecorporatetransactionsectorisreally
dependentonsomefundamentalissues
being sorted out. "The question of asset
values, and what a particular company
is worth at a particular moment, along
with factors such as the banks not
being in a position to back deals, are
fundamentaltothedealscene,"hesays.
Corporate teams in law firms are as
awareasanyoneelseoftherisingvalues
intheglobalstockmarketsbutthereare
still doubts over the sustainability of
thisrise.However,Willisoptimistic.
"More and more investment banks
are coming down on the side of this
beingagenuineBullrallyandthedomi-
nant thought out there at the moment
seems to be that there is little chance of
themarketslidingbacktoretestthelow
pointithitinMarch,"hesays.
This return in stock-market values
clearly anticipates a general increase in
the value of corporate assets, but if by
spring 2010 the recovery is somewhat
anaemic, then investors may well judge
that assets are overvalued and some of
thegainswillbelost,Willsuggests.
"This uncertainty is in everyone's
mind right now when they look at
whether or not to press ahead with an
acquisition,"hesays.
Onesolutionistoforgetmarketvalue
and look instead at the cash generative
power of the asset in question. Large
plcs such as Glaxo and Vodafone have
seen increases in their share price pre-
cisely because they are cash-generative
organisations who look to be able to
maintain their dividends. But lower
down the scale, the ability of smaller

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