Positive signs after dealmaking slowdown

Peterhead-based Macduff Shellfish was taken over by Clearwater Seafoods for �98.4 million. Picture: Contributed
Peterhead-based Macduff Shellfish was taken over by Clearwater Seafoods for �98.4 million. Picture: Contributed
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Dealmaking activity may have slowed at the end of 2015, but Anna Dove finds positive signals from the advisers

The final three months of 2015 didn’t match the exceptional volume of deals seen in Q3, but that didn’t stop dealmakers predicting high levels of activity across the board in Scotland in 2016. The North-east is still feeling the effects of the oil price downturn but non oil and gas transactions are picking up and in the Central Belt there has been notable deal activity in financial services.

BenRiach Distillery in Elgin. Picture: Peter Sandground

BenRiach Distillery in Elgin. Picture: Peter Sandground

“Certainly for us, we are objectively the most active corporate finance deal team in the Scottish market and we have seen a lot of deal flow for Scottish corporates doing transactions across the United Kingdom and internationally as well, as a big part of our practice has been for international buyers and investors into Scottish assets,” says Peter Lawson, head of corporate at Burness Paull.

In 2015, Burness Paull topped the Business Insider Legal Advisor Deals Table with the most completed deals (155) and the highest value of deals (>£16.9 billion).

Lawson highlights increased activity in the food and drink sector in light of the acquisition of Macduff Shellfish by Clearwater Seafoods, one of north America’s largest vertically integrated seafood companies.

More recently, the focus has been on Brown-Forman’s acquisition of the BenRiach Distillery Company for £285 million.

In financial services, Burness Paull has been advising Standard Life’s financial planning business, 1825.

“In essence it’s a start-up business that has started from a top-of-the-market very, very innovative technology and strong brand position so it’s a buy and build strategy of buying up IFA businesses across the UK,” explains Lawson.

“Already this year, 1825 has announced the acquisition of three businesses; Munro in Glasgow, Almary Green in Norwich and Baigre Davies in London. That’s three transactions in three weeks.”

Private equity is making a comeback, with healthy competition between trade and private equity for good businesses.

“Interestingly, we have really seen the banks being far more active over the last few years,” says Mark Ellis, head of private equity at Burness Paull.

“We have seen a large number of management buyout-type transactions where we have got banks leading the funding of those.

“I think that banks are very keen to get out and demonstrate that they are open to those kinds of acquisitions.”

Scotland continues to attract interest from international investors, which Ellis says is symptomatic of business across the globe. “Clearly technology and the skill set that Scotland has, has a particular attraction and there are particularly fine businesses around that.

“We are lucky enough to work with some great clients who are doing some great work and some great deals that are multi-jurisdictional.”

Aberdeen-based accountancy firm Anderson, Anderson & Brown (AAB) has bucked the trend in the North-east and reported an increase in transactions completed in 2015. “What we are finding in terms of our position in the market – we are doing deals across Scotland – is that the number of deals is increasing,” says Douglas Martin, partner at AAB.

The firm topped the table of dealmakers in Scotland in 2015 for the 11th consecutive year.

“The steady flow of deals in 2015 is continuing into 2016. The deals completed in 2015 were up from 51 to 55 but oil and gas deals were down from 36 to 27 and non oil and gas deals were up from 15 to 28.”

The City Deal for Aberdeen will go some way towards helping the city off the rollercoaster economy created by the peaks and troughs of the North Sea oil and gas industry.

“Aberdeen is now starting to get some deal attention from the key stakeholders and there’s definitely a bit more momentum and focus,” says Martin.

“It’s really starting to look at how all the technology applied in Aberdeen can be rolled out globally and that’s absolutely fundamental in how Aberdeen preserves its status as a leading player in oil and gas going forward.

“It needs to build its global centre of technology excellence. It needs to be taken advantage of because that’s where there’s a lot of opportunity.”

Jamie Stark, partner at Burness Paull, agrees that while it is a difficult time for oil and gas services, there are opportunities.

“From our conversations with clients, there’s some opportunity for bigger corporates with strong balance sheets to buy distressed businesses,” says Stark.

“What we have seen is some of the trade companies beginning to look and there certainly will be quite a number of deals of that nature over the next six months.

“One of the opportunities for the oil and gas sector is to apply the technology, personnel and equipment in non oil and gas sectors.

“That’s an area where we can see growth. You can apply the same technologies in renewables, for example.

“The market will recover and Aberdeen is a resilient city. It has been here before and it’s full of entrepreneurial people so they will work out the way forward. It’s not doom and gloom; we are trying to look at where the opportunities are.”

The uncertainty surrounding the European Union referendum this month has had little effect on dealmaking activity in Scotland, with the exception of the commercial property sector which attracts significant international investment.

“There is an impact on property deals so if property is the asset you are buying, there is a pause, generally speaking, and certain deals are structured with certain conditionality related to the vote,” says Lawson.

“But from a trading perspective, if you are buying a trading asset, it is not impacting at all. It’s business as usual.”

Lawson and Ellis agree that the atmosphere in the run-up to the EU vote is very different to that surrounding the referendum on independence in 2014.

Looking ahead to the rest of the year, the outlook is positive. “I do see the transactional activity continuing to be strong,” says Lawson.

“We are seeing signs of more activity in capital markets. There have been very few IPOs in corporate Scotland over the last 15 years but there are more signs of companies looking to go to market in the next 12 to 24 months than there have been for that whole time.

“That’s really encouraging that there is a focus on growth. The difference is that it feels like these processes are going to happen.

“There will be economic headwinds but there seems to be a bit more confidence that there will be less market turmoil.”


The acquisition of Peterhead-based Macduff Shellfish by Clearwater Seafoods for £98.4 million is just one example of recent activity in the food and drink sector.

Nova Scotia-based Clearwater Seafoods was committed to investing in expanding its menu of premium wild and sustainably harvested produce when it reached the deal to buy Macduff Shellfish Group, which has Europe’s largest scallop fishing fleet at 14 vessels and production plants in Mintlaw in Aberdeenshire and Stornoway on the Isle of Lewis.

“In the last six months, the Macduff/Clearwater deal was probably the key stand-out deal that we have been involved in and it highlights the international investment opportunity,” says Douglas Martin, partner at AAB in Aberdeen, who advised Macduff Shellfish along with legal firm Burness Paull.

“It’s a transformational acquisition that boosts Clearwater’s scale and provides the Canadian company broader access to retailers in international markets, especially in the UK, Italy, Spain and Portugal.

“The food and drink sector seems to be very active at the moment and there’s a lot of interest from international buyers.”

Under the terms of the deal, Macduff will retain its name and operate as a wholly-owned subsidiary of Clearwater, with the two businesses sharing resources and best practices.

The high-profile transaction was good news for the North-east, where deal activity has shifted from oil and gas services to other sectors.

“The Macduff deal demonstrated that the North Sea has other strings to its bow,” says Jamie Stark, partner at Burness Paull.

“These sectors – food and drink, tourism and hospitality – may not have been the focus of our attention until now because of the oil and gas industry.”

However Stark says it would be a mistake to suggest that these sectors will compensate in the short term for the gap left by the oil price downturn.

In April, Brown-Forman announced it had reached definitive agreement to purchase the BenRiach Distillery Company for approximately £285m.

When completed, the deal will see three single malt Scotch whisky brands join Brown-Forman’s ever-expanding wines and spirits portfolio.

Burness Paull is advising Brown-Forman on the deal.

“That’s been a great deal for us to be involved in,” says Mark Ellis, head of private equity at Burness Paull.

“With the interest that Scottish whisky holds around the world and particularly in the United States, they see taking premium brands and growing those brands across the US and Asia as a particularly attractive opportunity for them.

“Given the nature of the assets, it will be interesting to see if there’s a bigger or more attractive deal done this year.”


Deals for large Scottish commercial property assets bought by international investors totalled £574.12 million in the 13 months to the end of January, according to Knight Frank’s annual wealth report.

In the months since, transactional activity in the commercial property sector has slowed down, with dealmakers citing political uncertainty as the reasons buyers have hit “pause”.

“The heat that built up over 2015 has cooled off a bit and the reason for that is related to Brexit,” says Richard Rennie, partner at Burness Paull and one of Scotland’s leading real estate lawyers.

“There is a sense that the Brexit referendum is a good reason to hold off on making a decision. I suspect there’s a number of deals we are not seeing.

“Speaking to peers and other firms, the market is quite thin and the activity that we are seeing is not necessarily plain ‘vanilla’ investment; it’s student housing and hotels which are not on the same page as conventional stock.

“That said, we are doing several transactions that are going ahead regardless of Brexit.”

Some larger deals are conditional of a “remain vote” this month with parties uncertain of the effect an exit from the European Union would have on the commercial property market.

Rennie says regional cities such as Edinburgh and Glasgow shouldn’t take international investment for granted.

“Edinburgh and Glasgow are competing with other regional cities like Manchester and Birmingham,” he adds.

“Aberdeen has its own dynamic and it tends to operate in a different commercial property cycle to the rest of the UK.

“Aberdeen is so anchored on what’s happening in the oil price, which in the last 18 months has generally just been going one way.

“The picture in Aberdeen is nothing like as gloomy as it was in the rest of the country eight years ago. There is still a lot of activity.”

Recent stand-out Scottish commercial property deals are few and far between although the sale of Standard Life’s Edinburgh headquarters, right, to a private overseas client of HSBC for £95m – a deal which completed in December 2015 – was a highlight.

“It will be interesting to see the St James Centre [in Edinburgh, artist’s impression above],” says Rennie.

“Finally plans are taking shape to start work on it. What it will do to Edinburgh in terms of propelling it up the rating score for retail destinations has yet to be seen.”

Rennie says property will remain regardless of macro-level political and economic risks around the globe, such as the US presidential election in November and China’s slowing economy.

“There will still be an inherent value in having money in real estate in places like Edinburgh,” he says.

“The threat of another independence referendum will always spook people. They are concerned about the effect that will have on returns and value.

“We need a period of sustained stability.”

This article appears in the Summer 2016 edition of Vision Scotland. An online version can be read here. Further information about Vision Scotland here.