Working for faculty members
David Petrie, ICAEW’s head of corporate finance, reviews the Corporate Finance Faculty’s work in 2021 and sets out what’s in store for 2022.
We hope that the world might have passed the worst of the pandemic by the time this issue of Corporate Financier is published in early February. M&A hit record levels around the world last year, but deal-making relies on corporate finance networks. So, we’re looking forward to more events returning this year and were greatly encouraged by a record attendance at the faculty’s Annual Reception in London in November 2021. We aim to continue to help members develop networks and contacts – a key role for the faculty.
That the City of London remains competitive as a global hub for capital is absolutely critical for corporate finance – and for the UK economy as a whole. This was a big theme for the faculty’s work in 2021 and will continue to be important this year and beyond. While the US has a big advantage with its deep pools of finance and as an established centre for tech stocks – Apple’s valuation broke the $3trn threshold at the start of this year, which is more than the combined value of all the stocks listed in Frankfurt – London is a highly competitive centre for investment.
Last year, the faculty convened two round tables to inform Lord Hill and the Advisory Group to the UK Listings Review about the views of market participants on proposed changes, which we organised with EY partner Chris Locke. Work on capital markets is coordinated by ICAEW policy manager Katerina Joannou and we’re also informed by the invaluable work of the faculty’s technical committee, chaired by Deloitte partner Yvette Allen.
We must ensure that changes made to the Listing Rules retain the integrity of the markets that investors have come to expect. Knee-jerk reactions are not what’s required. This coming year, we’ll be contributing to a report for UK government about secondary capital raising that is being written by Mark Austin. Also, the Takeover Panel has proposed some (relatively minor) changes to the Takeover Code, so we’ll ensure that members’ views relevant to these changes are taken into account.
Advising the government
The faculty has been and will continue to be a significant contributor to the Department for Business, Energy and Industrial Strategy’s (BEIS’s) wide-ranging consultation on audit and corporate governance, with and on behalf of the ICAEW.
I’ve once again been asked to join the Business Finance Council convened by Kwasi Kwarteng, secretary of state for BEIS, and John Glen, City minister and economic secretary to the Treasury. The council is a forum for government to work with major lenders in order to ensure access to finance for SMEs.
In September, the faculty, PwC and Travers Smith jointly authored a highly informative and topical best-practice guideline about public-to-private transactions. Ian Hart, director general of the Takeover Panel, took part in an online forum on the subject.
Environmental, social and governance (ESG) are increasingly important considerations in private equity investment strategy, as well as for listed companies. The faculty is working with a specialist team at Deloitte, and several other member firms, on a new project about best-practice issues in corporate transactions; there are plans to publish a guideline.
In December, myself, faculty manager Shaun Beaney and Katerina Joannou were invited to update staff at UK Government Investments (UKGI) and corporate finance professionals in other government departments about market trends and new developments on green finance.
The Middle East Panel for faculty members, meanwhile, chaired by Sam Surrey and supported by ICAEW’s staff based in Dubai, has continued to extend the faculty’s influence in the region with a series of well-attended events.
We’ve taken part in several forums to help extend the reach of the Corporate Finance Faculty, with Shaun Beaney taking part in events organised by Immerse UK, Liverpool City Region’s Growth Platform, the East London Inclusive Enterprise Zone, Watford Young Entrepreneurs, and RTC North. I’ve spoken at events organised by the Chartered Institute for Securities & Investment and ICAEW in the North West, and by ICAEW’s Northern and Yorkshire and Humberside regions.
The faculty has continued to grow as an influential professional network. Over the past two years, we’ve added 14 new member firms. We aim to strengthen this network further during 2022.
Top security
Lord Callanan, minister for business, energy and corporate responsibility, was the guest speaker at a National Security and Investment Act (NSIA) ‘launch’ event at Chartered Accountants’ Hall on 1 December, organised by the Corporate Finance Faculty with officials from the Department for Business, Energy and Industrial Strategy (BEIS).
Lord Callanan said that intensified international competition, a complex global economy, sweeping technological changes and the increasing influence of some non-state actors meant the government’s power to scrutinise acquisitions on national security grounds was required more than ever. He said a considered and evidence-based approach had been taken to making the reforms.
The NSIA, which came into force on 4 January 2022, will give the UK government new powers to scrutinise business transactions and intervene in takeovers and investments by foreign companies whenever it believes there could be a risk to national security.
Callanan said: “We absolutely want to encourage free trade and investment. These reforms are about modernising existing power that derives from the Enterprise Act 2002. We continue to see more ingenious threats to our way of life and the NSIA is designed to protect our modern, outward-facing economy. The majority of acquisitions will be unaffected by these powers.”
The Act can be applied retrospectively to deals from 12 November 2020. The government estimates that up to 1,800 deals a year could be affected. Directors of companies that fail to give notification of proposed acquisitions could face personal fines of up to £10m, or their businesses could pay penalties up to 5% of annual turnover.
Michael Izza, ICAEW’s chief executive, said that the UK struck a difficult balancing act in bringing forward legislation that seeks to subject foreign investment to greater scrutiny and challenge, while ensuring the UK remains one of the best places in the world to do business. “This marks a step-change in the regulation and conduct of many M&A, private equity, infrastructure investment, venture capital and capital market transactions that involve UK businesses across 17 specified sectors.”
He added that the new legislation would be very important to Institute members, “especially the tens of thousands involved in corporate finance transactions. Maintaining attractiveness to investment is essential as we continue to build our economic recovery.”
Izza stressed the importance of both overseas and domestic investor confidence in the UK economy: “The NSIA will inform the work of chartered accountants operating in economies here and across the globe who use their professional judgement when advising businesses on how to grow and succeed.”
There followed a highly informative panel discussion with:
- Sam Bagot, Cleary Gottlieb partner; member of the company law committee of the City of London Law Society;
- Chris Blairs, deputy director of national security policy, BEIS;
- Fenton Burgin, head of UK advisory, Deloitte; member of the ICAEW Corporate Finance Faculty board;
- Selina Sagayam, Gibson Dunn partner; member of the ICAEW Corporate Finance Faculty board; and
- Dr Andy Sellars, strategic development director, CSA Catapult.
Lord Callanan thanked ICAEW’s head of corporate finance, David Petrie, for the critical role he has played in the drafting of the legislation since 2017, including contributions to both the green and white papers. Petrie sits on the expert advisory group, which has been instrumental in developing much of the guidance relating to the Act and ensuring the new rules are workable for companies, advisers and investors.
Two sets of guidance have been published and Lord Callanan said more would be published six months after the act came into force.
See icaew.com/nationalsecurity
New initiatives for early-stage ventures and innovation
The Corporate Finance Faculty continued its work on behalf of ICAEW to support investment in start-ups and early-stage ventures run by people from diverse social, educational and professional backgrounds.
Faculty manager Shaun Beaney leads this work, including engagement with Innovate UK. In 2022, the faculty will be developing a new initiative, ‘Boosting Growth Capital for Innovation’.
Beaney is a member of the Department for Digital, Culture, Media and Sport’s advisory panel for its Creative Scale Up pilot. The scheme has so far supported 149 ventures, across Greater Manchester, West Midlands and West of England, and will be expanded to more English regions.
Beaney is also a member of the Investment in Growth working group of the UK government-sponsored Creative Industry Council and he represents ICAEW in the Immerse UK network.
In November, he was a guest speaker at the inaugural event for Watford Young Entrepreneurs, hosted by the University of Hertfordshire. In December, he joined an assessment panel for a start-up pitching session by Entrepreneurship and Innovation BSc students at Brunel University London Business School. He was invited to take part by Dani Saghafi, programme leader and head of the consulting group at Brunel and a member of the Corporate Finance Faculty’s Technical Committee.