Q1 2020 Equity raising announcements show a significant fall

Worrying but expected statistics have been released with regards to announced equity raising activities by UK businesses in Q1 2020.

Investment levels have dropped to their lowest level since Q3 2014 and suggest contraction by a third when compared with Q4 2019. Trends over the last few weeks reveal further falls in activity as the impacts of COVID19 have stunted activity across all major sectors other than isolated operations connected to defined public services and connected key workers.

Recent activity suggests a change in focus by equity funders as they are focusing on existing investments which may require additional funding support. This trend is likely to continue for some time and existing offers may be changed, withdrawn or delayed.

New investment will be less frequent as we enter the summer months albeit some funders remain active and we may see consolidation activity through mergers. This will be worrying for early stage and start up businesses who are reliant on equity funding and do not qualify for support through recently announced government schemes.

We are seeing some speculative behaviour from robust businesses and angel investors looking for bargain deals, so beware of the valuation implications of the liquidity shortage.

In such a volatile period, business owners will more than ever need to ensure their finances are in check and that they have a robust financial plan which will allow them to resurface intact following an extended lockdown period.

We have an experienced team who can assist with financial modelling and planning as well as assisting those looking to pivot and pursue new plans to support their ongoing viability and growth, whether that be through investment, mergers or joint ventures.

This blog was written by Lee Humble, Corporate Finance Associate Partner.