Top dealmaker: Fear of Corbyn is driving firms to sell up
Veteran dealmaker warns of the REAL threat facing British business...
LORD Leigh of Hurley has had many roles in his long and illustrious career in the City – but the veteran dealmaker might have to play the part of peacemaker this weekend. The Tory peer and founder of prolific City adviser Cavendish Corporate Finance is hosting his annual drinks bash with a guestlist that, after last week’s political fireworks, could produce some fiery encounters. The Chancellor Sajid Javid, his predecessor Philip Hammond, Iain Duncan Smith and Lord Young – who have butted heads over Brexit in recent days – are all due to attend.
‘It could be…’ Lord Leigh smiles as he struggles to find the right word during our lunchtime chat. Awkward is the word I think he is looking for.
Why would you stay on the Stock Exchange? You’d run to a wealth fund
But the political chaos engulfing Westminster, the City, as well as our television screens goes well beyond a few sharp words and steely gazes in his back garden over a glass of fizz.
‘What’s been driving our business is the fear of Corbyn,’ he explains as Boris Johnson’s historic round of defeats in Parliament brings the chances of an Election into view.
A Labour plan to axe Entrepreneurs’ Relief – which would raise the tax business owners pay when they sell up from 10 per cent to as much as 50 per cent – has caused alarm. ‘It would have a dramatic effect,’ says Lord Leigh, who has spoken to dozens of entrepreneurs hoping to sell their businesses in case Labour’s tax raid leaves them out of pocket.
‘The driver for many entrepreneurs has been to sell their business whilst they can get Entrepreneurs’ Relief. And there are some who are pushing it to happen quickly.’ He imagines there must be thousands of other entrepreneurs across the UK who share this concern.
That’s not all. He believes Corbyn’s plans to nationalise some firms and hand shares to workers – a move which is estimated will cost pension funds and investors £300 billion – is ‘frightening because it’s state theft’. He also fears a knock-on effect for the stock market if Corbyn does seize power.
‘It won’t help the IPO market [companies selling shares on the stock exchange] because people will think, “Well, the last thing I want to do is go public and have my shares nicked,”’ says Lord Leigh.
‘You might see a lot of companies [sell up] on the back of that. Why would you stay on the Stock Exchange? You’d run around to Middle Eastern sovereign wealth funds or someone and get yourself off at a cheap price. It’s the usual law of unintended consequences.’
Would these overseas buyers be interested given the Corbyn risk? Lord Leigh, who is also vice president of the Jewish Leadership Council, says they are less worried, firstly because they don’t believe he will get into power, and secondly because they think if they are not listed they will be protected from his most drastic plans.
Lord Leigh previously backed Theresa May’s Withdrawal Agreement but now backs a quick exit, through a hard Brexit, to avoid further uncertainty which would raise the prospect of a Corbyn government. He says the current divisions in the Tory party are ‘unfortunate’, but thinks the ultimate goal for all should be stopping Corbyn.
Despite the spectre of Corbyn looming large, he still believes British brands are attracting plenty of interest from overseas buyers – partly, he admits, thanks to a weaker pound.
Lord Leigh founded Cavendish more than 30 years ago after setting up the mergers and acquisitions division for Deloitte, where he also worked as a tax consultant. Since then it has helped advise around 600 companies on selling or buying others. The last 12 months were the best in its history after it closed 28 deals.
Lord Leigh is speaking for the first time since Cavendish was bought by City broker FinnCap for £15million in December. The enlarged company, chaired by veteran tycoon Jon Moulton, floated on the junior AIM market at the same time and Lord Leigh became executive deputy chair.
As a donor to the Conservatives, Lord Leigh was made the party Treasurer in 2000 and remains a senior treasurer to the party. He was made a life peer in 2013.
He is also an adviser to Metro Bank and supports under-fire founder Vernon Hill (‘removing him is not the answer’). But he attacks the US tech giants for not paying enough tax despite concerns that increasing Google and Amazon’s payments might upset a trade deal with President Trump.
‘Trump is very much against it, but it’s got to happen.’
Lord Leigh has also served on the Takeover Panel, which oversees acquisitions of British firms.
He says it used to be a place where post-deal assurances – good stewardship such as keeping jobs onshore – was ‘all done by gentlemanly agreements and handshakes’. He says Americans could never understand what the sanctions might be if new owners reneged.
‘I’d say, “Well, the sanctions are you’re cold shouldered.” ’ The Americans would ask what that cost. And I’d say, “Well, it doesn’t cost anything, you’re just cold shouldered – you’ll be banned from White’s [the gentleman’s club].” ’
He insists the system worked well. But he reckons the Takeover Panel might start to intervene in a growing number of circumstances if a rise in deals led by short-term investors begins to cause them to turn sour.
‘I never understand how activist investors work,’ he says. ‘How is it you get 5 per cent of the stock and you can completely change a business?’ Perhaps he will feel less aggrieved if some of them end up generating more fees for Cavendish.