The financial sector has had a torrid time over the past two years, but the Channel Islands-based law firm Mourant du Feu & Jeune is seeing signs of a recovery in deal flow. James Harris reports
The financial sector has had a torrid time over the past two years, but the Channel Islands-based law firm Mourant du Feu & Jeune is seeing signs of a recovery in deal flow. James Harris reports
‘Deal activity has increased threefold at least in the past six months. The summer was particularly strong. Where we were receiving tentative instructions before, the instructions are now turning into real deals,’ says Matthew Shaxson, senior associate and head of Jersey M&A at law firm Mourant du Feu & Jeune.
While many advisers are feeling the pinch of the global downturn, Mourant du Feu & Jeune, the 33-partner firm that operates from offices in Jersey, Guernsey, London and the Cayman Islands, has continued to perform strongly.
The Channel Islands focus of the M&A practice, which houses one partner in each of the firm’s Jersey and Guernsey offices, has naturally led to a specialisation in the financial services industry. Shaxson says: ‘Nine out of ten deals we handle are trade sales or purchases between financial institutions.’
Where the money goes
There is a strong advantage to operating in this sector, claims Shaxson: ‘We deal with blue-chip banks and financial institutions, which means they don’t need third-party funding as their resources for acquisitions are still intact.’
Naturally, there is still a way to go before the deal flow can be described as normal, but Shaxson insists there are positive signs: ‘Purchasers are looking more closely at what is being offered by vendors. There’s more emphasis on reputational risk and compliance reviews. Purchasers are also increasingly sophisticated as to how they structure the consideration, often withholding part of the purchase price in a more aggressive and focused way than previously.’
Shaxson says there have been welcome changes in the regulatory environment in which financial services companies can conduct M&A. Also encouraging was the placing of both Channel Islands on the OECD ‘white list’. ‘Both islands have mature, proactive regulatory regimes, so the regulatory environment is constantly under review,’ he says. ‘There are a lot of businesses that previously didn’t fall within the full remit of the legislation, but now they do. It puts a significant, but entirely appropriate, burden on businesses and we are seeing this affect transactions from the perspective of both purchasers and vendors.’
Deal management
The types of deals worked on during the financial crisis have been varied. ‘We’ve enjoyed a large workload generated from credit crunch-related state intervention, ranging from providing the initial regulatory analysis through to advising on the implementation of whatever mergers or restructurings arise as a consequence of the intervention.’
Private equity firms have also woken up from their deal slumber, although, as Shaxson notes, they tend to have a different approach: ‘It’s fair to say that these deals are financially driven, so private equity firms take more of an interest in the financial credentials and the quality of the management team, whereas trade purchasers tend to be more focused on amalgamation issues and the quality of the underlying book of business.’
Shaxson attributes the deal bounce primarily to more flexibility on the part of sellers: ‘There has definitely been a shift in vendors’ expectations generally. The realignment of vendors’ expectations towards those more compatible with purchasers has given the space for deals to proceed. It might also be a matter of changing market sentiment or the desire of firms to do a deal after being inactive for two years.’
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