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The Rise of Company Insolvencies in Britain Benefiting Consultancies
Begbies Traynor: Positioned to Benefit from Rising Insolvencies
Analysts are predicting that Begbies Traynor, the largest corporate insolvency practitioner in the UK, is well-positioned to benefit from the increasing number of company insolvencies. Economic conditions in the UK are worsening due to rising interest rates, high inflation, and supply chain problems. As a result, Begbies Traynor's core insolvency division is expected to experience significant growth. The company has demonstrated its ability to perform throughout the cycle, with a track record of doubling revenue and tripling adjusted pre-tax profit. Investment bank Berenberg expects the stock to rise by 31% over the next 12 months.
FRP Advisory: Expanding Market Share in Administrations
FRP Advisory Group, the second largest corporate insolvency practitioner in the UK, is also seeing a rise in demand for its services. The firm has expanded its market share in administrations over the past five years and is well-positioned to benefit from the expected increase in volumes. Analysts at Stifel see a scope for administration volumes to rise to historical levels in the coming years. Berenberg also sees growth potential in FRP Advisory's non-insolvency business segments. The bank predicts a 47% increase in the stock price over the next 12 months.
Analysts' Positive Outlook
Both Begbies Traynor and FRP Advisory have received positive outlooks from investment banks. Analysts at Canaccord Genuity and Stifel believe that Begbies Traynor is strongly positioned, with over 80% of its revenue derived from counter-cyclical insolvency services. These banks expect the stock to increase by 40% over the next year. Stifel analyst Sam Dindol also has a positive view on FRP Advisory, stating that the firm's market leadership in administrations makes it well-placed to benefit from the expected increase in volumes. Dindol has a price target of £1.60, representing a 35% upside on the stock.
Conclusion: The Opportune Landscape for New Businesses in the UK
With the rise in company insolvencies in Britain, consultancies specializing in corporate insolvency, such as Begbies Traynor and FRP Advisory, are poised to benefit from the increasing demand for their services. As economic conditions worsen in the UK due to factors like rising interest rates, high inflation, and supply chain problems, these consultancies are well-positioned to see significant growth in their core insolvency divisions.
For new businesses entering the market, the current landscape presents both challenges and opportunities. On one hand, the increasing number of company insolvencies highlights the potential risks and uncertainties in the business environment. However, on the other hand, it creates a demand for services that these consultancies provide, making them valuable resources for businesses looking to navigate the complexities of insolvency.
By strategically partnering with consultancies like Begbies Traynor or FRP Advisory, new businesses can benefit from their expertise in handling insolvency situations. These consultancies have a track record of success and are trusted by investors and analysts. With positive outlooks from investment banks, the stocks of both companies are expected to rise in the coming months, reflecting the growing confidence in their business prospects.
While insolvency is not an ideal outcome, the presence of established consultancies specialized in this field provides a silver lining for new businesses. It offers a safety net and access to expert guidance in managing financial distress or potential insolvency. By recognizing the current landscape and proactively seeking assistance from such consultancies, new businesses can position themselves more effectively and mitigate risks in their journey towards success.
Article First Published at: https://www.cnbc.com/2023/08/01/2-bankruptcy-managers-could-soar-30percent-on-rising-defaults-analysts.html