INTERVIEW: Phil Adams of Houlihan Lokey on a strong community spirit

WhatsApp groups in the local advisory market were lit up when TheBusinessDesk.com broke the news that Deloitte were effectively withdrawing from the regional corporate finance advisory business.

With former KPMG head Jonathan Boyers readying for his own ambitious change agenda at Alvarez & Marsal, there seems to be a perfect storm of disruption into the regional market. 

Add into that mix the perception locally that Phil Adams and his prolific team at Houlihan Lokey are also operating in a super league of advisors, a notch above the fees paid in the regional market. And factor in to that the response to a changing market from Clearwater was to go early with sector specialisms and to build a formidable international network.

So as the shake-up in the regional market takes hold, Adams doesn’t think Deloitte withdrawing from the local corporate finance market will have much of an impact on Houlihan Lokey’s business, he told TheBusinessDesk.com in a frank and insightful interview.

“Our businesses kind of changed massively in the last 10 years. So we very rarely competed directly with them. But obviously, from a regional perspective, it’s not great for the market to have someone that was such a strong player choosing not to be in it,” he says.

He’s softly spoken with a still discernible scouse lilt, and reflects on the conversations he still has with a tight and supportive community that he grew up and matured in through the last two decades.

“However, the quality of companies in the regional markets is such that it’s not a material blow, life goes on. There’s some very good advisors out there, and I’m sure there will be new entrants like A&M coming in. I wouldn’t be surprised to see new firms springing up in coming years.

“There’s a vibrant corporate finance market, but it has changed, and it’s become much more focused on the bigger deal size, it’s much more sector focused. And to be properly sector focused, you need an international platform, which means the barriers to entry are higher for the bigger deals, but for the smaller deals, there’s a huge opportunity,” he says.

Adams first made his name working alongside Richard Hughes and Ian Currie as Apax Partners, then Altium, at the turn of the millennium. They were adept at spotting opportunities with quoted companies and successfully floated businesses on AIM. When Hughes and Currie left to set up Zeus in 2002 Adams was left in a “sink or swim” situation. It’s fair to see he soon found his stroke and developed a distinctive identity for Altium’s Manchester operation under his leadership.

He successfully built the Manchester team in his own image between 2002 and 2007 before rising to become Altium UK chief executive in 2007, before then taking the position of overall global chief in October 2010.

Fast forward more than a decade and with the small matter of pivoting and closing a broking arm in the aftermath of the global financial crisis in 2008 and Altium first joined Tokyo headquartered GCA in 2015 and then in 2021 GCA Altium was acquired by Houlihan Lokey, the leading global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation.

Phil Adams collects the Rainmaker of the Year award in 2021

Adams is now managing director and global head of technology within Houlihan Lokey’s Technology Group. He brings the experience of advising on more than 80 public and private mergers and acquisitions and all from the Manchester office.

None of it has dimmed his commitment to the North, or his ties to the bustle of the corporate finance community, something recognised by his peers when he was chosen as Rainmaker of the Year in 2021. 

“I think the sweet spot is the ability to sit with a client and basically offer them the best advice, because we have every aspect covered, whether it’s debt advisory, or sector specialism, or IPO advisory or access to Asian buyers, or US buyers,” he says.

“We have sub sector specialists, which means when you meet a company, whatever region or office you’re in, you partner with the sub sector specialists, which means your client gets better advice, without losing the relationship piece,” he adds.

There’s a particular appetite at the moment for Software as a service businesses with recurring revenue, especially businesses that have been resilient through the series of shocks to the global economy this decade. 

And while there was a post-Covid boom, and a willingness to pay high for growth, now the focus is more on profit and cash generation. “I think what we’ve seen is a big shift over the last couple years. So in 2021, it was all about growth. Now, investors still want growth, but they don’t want growth at the price of profitability. And that’s had a massive impact in the US. There was a huge investment in high growth businesses that ultimately now can’t raise more money. But in Europe, businesses have tended to be more based on profit than pure growth.”

Another trend he is watching closely is the underinvestment of private equity funds, and the time that many assets have been held for. Houlihan Lokey research (graph, left) suggests the amount of money invested for longer than five years is at its highest ever level. 

“Ultimately the private equity model is based on deal activity. So you can’t have a scenario where PE sits on its hands forever. So there is this dynamic where it’s harder to raise new funds for private equity. The market is tougher to sell assets in, because we’ve had a number of shocks such as the Ukraine war, rising interest rates, and that has meant pricing on M&A has become harder.”

How does he think the deadlock can be broken?

“I think the catalysts will be the weight of a need to ‘do stuff’ at some point. It may well be if interest rates start to come down again. Then there’s  political change. More of the democratic world is voting this year than any other year, so you may see an election effect. 

“We have seen that in the past in the UK, where entrepreneurs choose to sell businesses because they’re concerned about tax impact. I think Labour haven’t indicated or said anything that would immediately cause that fear.”

Adams seems content in his role for a major global player in the M&A world. Thoughtful, ambitious, but also remarkably grounded. 

His involvement with Altrincham Football Club, broking a syndicate of investors, is a good example of his persona – ambitious, community minded and based on a network of successful friends and neighbours.

The Rainmakers Conference is taking place next month in Manchester and is an opportunity to not only celebrate the contribution from funds raised and deals created, but also to look to the future at the challenges ahead.

The event is being organised by TheBusinessDesk.com and the partners in this event believe passionately that the jobs created, specialisms developed, and the entrepreneurs unleashed give the Rainmakers community the right to a seat at the table and a voice in the debate on the economy of the North.

It has been forged alongside the key partners from private equity and specialist financiers in the North, and backed by elite teams of advisory businesses, the event will bring together funders, entrepreneurs, business leaders to focus on opportunities and challenges.

The day will feature keynote speakers and panel discussions addressing key challenges such as the mobilisation of pension fund assets into investment opportunities, impact investing, building a talent pool in corporate finance, creating the pipeline of investable businesses with potential.

Check out the agenda and book your places at www.rainmakersconference.co.uk.