Reflection On 2016 And Opportunities In Corporate Markets 2017

Thu 08 Dec 2016

Paul Matthews, Executive Director of Corporate Markets at Equiniti shares his thoughts

Shortly after the UK voted to exit the EU, we interviewed Paul Matthews on film:  

Nearing the end of 2016, we caught up with Paul again to reflect on the year as a whole and to look ahead to 2017.

Q. A few months after the Brexit vote, do you think markets are more stable than were anticipated?

A. The markets have calmed albeit against the ongoing backdrop of uncertainty. Whilst activity on the FTSE100 appears to have been a bit of a roller coaster in terms of how high it reached post Brexit, which was a surprise to us all, it has now come down a bit which is further testament to the uncertainty that exists in corporates and investors’ minds at the moment.

There has been a great deal of press about investor appetite recently, and though some might benefit from the changes in sterling, the market has seen the benefit of investing in the solid long-serving businesses with steady and consistent year-on-year performance, which will likely continue during these changeable times.

 

Q. 2016 is likely to be remembered for big political surprises across the Atlantic and the decision by the UK electorate to exit the EU. What are your thoughts?

A. The vote for Brexit and the election of Donald Trump in the US are not too dissimilar; in terms of their surprise and the uncertainty that now exists around what will happen next. With Brexit, the triggering of Article 50 and the impending court challenge is likely to delay things further. Likewise with the election of Donald Trump, there is speculation about what he will do when he takes office, but at this stage it’s impossible to make a judgement call as to what the impact will be.

It is almost as though people have switched off to what they don’t know and can’t change, choosing to get on with it and deal with the outcome rather than continue to speculate.

 

Q. Do you believe companies will be planning for significant change ahead of Brexit?

A. It rather depends on the Brexit negotiations and the impact this has primarily on London as a financial centre. If the impact is minimal and trading and currency activity remain in the UK, then arguably there will be no need for businesses to move out of the UK. Businesses have to keep their minds open and keep it under review. We aren’t suddenly going to stop being one of the top financial centres overnight.

Businesses need to carefully consider what the impact and the fallout will be, and they need to do the necessary intelligence gathering and due diligence planning around different scenarios. But essentially until they have greater clarity on the impact of recent events, significant change is unlikely.

 

Q. You mention at the time of filming we were heading towards £100 billion of corporate action processing. Has this slowed since the Brexit vote?

A. Quite the opposite in fact. The SABMiller acquisition that Equiniti was involved with recently has brought this figure closer to £200 billion. It has been a monumental year for large corporate actions. Equiniti has been involved with all; the Royal Dutch Shell takeover of the BG Group, SoftBank’s decision to acquire technology firm ARM Holdings, and of course the recent £70billion acquisition of SABMiller by brewer Anheuser-Busch InBev.

 

Q. Do you see this corporate action activity continuing in 2017?

A. There are no early signs of what corporate action activity might look like in 2017, but it would be hard to believe the trend wouldn’t continue in 2017. UK PLC’s are looking very attractive to foreign acquirers.

 

Q. What impact will interest rate fluctuations have in 2017?

A. A lot of people will be looking at the implications of what a potentially zero rate interest environment would mean for businesses. But in one breath you hear that we might go to 0% and in the next we could be rising within the next few months. The nature of this unsettled environment means there is just no clarity on what the next direction will be. Again businesses need to plan for every eventuality.

 

Q. What part is Equiniti playing in helping guide clients in these uncertain times?

A. We can’t influence our clients in terms of their business strategies, but we can continue to develop innovative solutions for them, and encourage them to use their shares as currency for their employees, as there is no denying share plans are still a key element of reward and incentivisation.

We hold the share registers on behalf of many of the top corporates in the UK, and one vital role we fulfil is providing clients with the knowledge and awareness of who their shareholders are. That information is as critical as ever when there is increased market volatility.

 

Q. Should businesses still be innovating and being brave during these uncertain times?

A. Absolutely, they have to continue to invest in innovation and growth, shareholders wouldn’t want the company to stand still.