Taking on the challenges

Since starting with KPMG, some 18 years ago, Paul Hollway has followed both the growth of Northern Ireland’s economy and the boom of Celtic Tiger in Dublin at the start of this decade. Now with the recession taking hold on both sides of the border, he is seeing the effects of the downturn on the wider business community.

“I think things have changed and improved in Northern Ireland over the last ten years. I guess that if you think back to before I went to Dublin, before the property boom, you had a big grant culture within Northern Ireland businesses. We had a significant number of large manufacturing plants, we were very reliant on the public sector and we had an economy that really wasn’t growing that fast. It was a relatively dormant, slow-burn type economy with high dependency on the public sector,” he reflects.

With the advent of the Celtic Tiger in the Republic, that momentum stimulated growth across the border, as seen by the rise in property prices, the fall in unemployment levels and the influx of migrant workers. At the same time, the Northern Ireland public sector started to spend more on health, water, roads and education infrastructure. The heady days of escalated property prices may be over but the province’s economy now has new foundations which can provide a platform from which to meet the current economic challenges.

“That has changed,” he acknowledges, referring to general business behaviour, “I think that we now have an economy which has much more private sector initiative; there are more individuals who are developing intellectual property, patents, seeking investment in their initiatives, and we are not as dependent on grant funding. So businesses frequently have to answer to the private sector investors, and I think that’s a good thing.”

Twelve years ago, clients tended to ask KPMG to draw up business plans to facilitate a government grant. “Things have moved on since then,” he continues. “Companies now want business plans to raise equity and debt, thereby sourcing investment from the private sector.”

Hollway heads up KPMG’s Corporate Finance team in Belfast, which has three dedicated teams: private sector M&A, including property; Infrastructure, including PPP; and public sector advisory work. Deals in 2008 include advising government on SERC (East Down and Lisburn campuses) PPP Projects, Derry Schools PPP Project and the sale of Belfast City Airport. Since taking up the post in 2003, he has seen the team develop from four people in 2003 to over 30 today.

KPMG has experienced “massive growth across all fronts”, almost doubling in size over the last five years. Since Jon D’Arcy was appointed Chairman of the Belfast practice in 2000, it has grown from 100 staff to nearly 200. Ten partners are based in the Belfast office, of whom six are in Tax, two in Audit, and one in each of Corporate Finance and Corporate Recovery.

“Effectively I joined KPMG in Belfast in 1991, went to Dublin, gained excellent experience there between 2000 and 2003 and returned to Belfast after that. I think we’ve brought the experience in Dublin back up to grow the team and develop the KPMG brand. KPMG is truly an all- Ireland practice in terms of services we offer to clients on an all-island basis and on a UK-wide basis.”


Within public sector investment, quality has become a higher priority, as seen through the two motorway packages, the Odyssey Arena, Belfast Waterfront, the Alpha and Omega Water Projects and indeed Invest NI’s new headquarters. More interaction, Hollway notes, is taking place between the public sector and the private sector, and the public sector is, in turn, “demanding more value for what it gets.”

“One way this is happening is the public sector’s insistence on ensuring private sector standards are applied for any work contracted to it. There’s no doubt there’s a private sector culture in the public sector now, which is improving efficiency, standards, and bringing more commercialism into that arena.”

He thinks that the Strategic Investment Board (SIB) has played a helpful role in managing the public-private links, though he appreciates that the remit of bringing together the two sectors is a “very difficult” one.

“In relation to the SIB, you won’t see the real benefits for a period of time,” he comments, pointing out that public sector assets have a useful life of between 20 and 50 years and can take three to five years to procure and build, “from inception through to turnkey.”

“I believe they have a challenging role but they have assisted in driving projects forward, and I think it’s taking time to get wider buy-in across the public sector. The SIB has a difficult task trying to bring both the public and private sectors together; and both sectors need time to understand how the other works.”


Notwithstanding this progress, the recession is now clearly felt throughout the province’s business community.

“As far as economic conditions go, I think we are starting to see the impact of the recession; 2009 is going to be a year for careful planning and consideration. I think we will see further job losses, we will hear about high-profile casualties and that’s going to continue throughout the year,” he predicts.

“Northern Ireland will hopefully not be hit as severely as the Republic’s economy. There’s going to be even more pain south of the border and we are starting to see that now. A lot of people talk about the change in property and house prices and see that as the most obvious impact of current economic conditions. However further impacts will be seen through job losses as other sectors such as retail and manufacturing react to the current economic climate.

Added to the recession, the credit crunch has led to a “scarcity of debt” in the banks, resulting in the need for government intervention. He will wait and see whether lowering interest rates to 1.5 per cent and reducing VAT to 15 per cent will boost the UK economy but says the Government and Bank of England are “likely to do more on these issues.”


In corporate finance, the much reduced availability of capital makes completing deals more difficult. The new economic situation tends to favour buyers, who have more leverage to negotiate with vendors.

“There are fewer deals being completed at high multiples,” he observes, “but what you are seeing is a group of purchasers emerging who have capital resources at their disposal and who can now buy at real value.”

“Deal flow is still there. It’s not as prevalent but it’s a different type of buyer. It’s your more conservative purchaser who will buy at what they deem to be the appropriate value now. And within that, you will also have sellers who really wouldn’t be selling in a normal situation but the financial structure of their business means that they either bring in more capital or they sell the business because of the financial pressure.

“In infrastructure projects, including Public-Private Partnerships, construction costs are falling and contractors will price much lower than when the market was buoyant, when at times it was difficult to get a contractor to price at all. So it is now possible to negotiate deals and demonstrate greater value-for-money. The falling price of oil and steel will also help from infrastructure’s perspective.”

Bringing infrastructure projects forward is one way in which the Assembly can help stimulate investment, he suggests, in the light of the good value-for-money that infrastructure now offers and the highly competitive construction market. Indeed, he points out that Gordon Brown and Barack Obama are already advocating this approach.

“Infrastructure investment is important for two reasons. First you get a stimulus from the capital investment. Second, and more important in the long-term, infrastructure has a direct bearing on business. KPMG’s latest report* shows that 90 per cent of respondents cite quality and availability of infrastructure as directly affecting where they locate and expand their business operations.”

Public sector reliance

As the downturn hits the private sector, companies are more reliant on the public sector for business. Hollway and his team understand both the advice that the public sector needs and also the way in which the private sector operates. And he finds that the private sector’s approach to the public sector has changed dramatically in the last 12 months.

“More credence is placed on contracts with the public sector as opposed to contracts with large private sector organisations who perhaps no longer have the strength of covenant that they would have had previously. That has resulted in an increase in the advice that the public sector needs from individuals who have experience in dealing with the private sector,” he says.

Turning to public sector assets, he says that some form of commercialisation should be considered. “And I’m not talking about selling them off to the private sector,” he is quick to add. “I’m talking about the public sector working in conjunction with the private sector, to ‘sweat’ the public sector’s assets a bit, try and get some activity, create jobs, generate revenue streams for both the public sector and the private sector, and generally act as a stimulant.”

Business prospects

Despite the economy’s current difficulties, there will always be a constant level of business activity, in which trusted advisors such as KPMG will be needed, whether to complete and execute transactions or deal with the problems facing troubled businesses.

The appetite for deals, though, is certainly less than before: “The financing of large property deals is no longer present, banks are under pressure, it’s a different market.”

“There are individuals and companies out there that will always do deals – either need to, want to or feel the obligation to be active – and that creates a level of activity in the economy which is healthy. On the downside, there are going to be distressed businesses, some of which are going to go into administration or receivership, and others which will be sold on but again that is going to create activity in itself. There has to be, by the nature of the economy, a lot of recovery work to be done.”

Quite a lot of business valuation activity is also taking place. Funders, buyers and investors are paying more attention to this specialism within which KPMG has deep expertise.

“Governance is as important as ever, both in the public sector and the private sector, because there is increased scrutiny all the time,” he remarks, noting that this is also a significant growth area for KPMG.

On the positive side for the economy, there is evidence that high net worth individuals who have not invested in property are “coming to the fore” and are prepared to invest their money and take equity stakes in private businesses. This intervention by entrepreneurs is especially useful in helping companies to roll out patents and new ideas; and KPMG is currently working on four examples of this. These are very exciting opportunities not only for the companies and investors, but also for Northern Ireland.

“Venture capitalists were being squeezed out over the last five years by the banks’ aggressive lending. That’s coming all the way back and there’s now the opportunity for equity and venture capital or ‘business angels’. There’s no coincidence that you’ll see more of these deals done,” he explains. “The banks’ current more conservative views to funding leaves a natural funding gap for VCs. Private equity has a role to play there.”

Asked for a concluding ‘nugget’ of advice on doing a deal, Hollway suggests that “one of the key things to consider is the compatibility between what you’re bringing together, including management styles, personalities and the culture of organisations.”

“It’s not just about the numbers,” he adds. “There’s a synergy that’s frequently talked about. The delivery of synergy is difficult. I would always challenge the expectation of synergy and say that through acquisition you should benefit from immediate growth and that synergy will take time and hard work; very rarely will synergy simply materialise.”

The state of the economy, both global and local, makes growth a challenge at this time but based on his understanding of how business and public service works in the province, Hollway is at least confident that Northern Ireland can face up to the challenge. From that point of view, the current difficulties can be addressed through time, despite the current nervousness over where the economic road ahead will take the province in the short-term. “The current difficulties need to be addressed, there will be more bad news but this will be necessary for the economy to recover. Whilst times are challenging and Northern Ireland is not immune to these difficulties, with the right leadership there is potential to manage through the current downturn. Everyone needs to work together and none more so than the public and private sectors.”

Profile: Paul Hollway

Paul studied accountancy at Queen’s University Belfast from 1987 to 1990, after which he completed an MBA at the University of Ulster, at Jordanstown.

He joined KPMG in Belfast in 1991, qualifying as a chartered accountant in 1994. After his appointment as a Manager in the firm in 1996, his work focussed on corporate finance, mergers and acquisitions in the private sector, and early PFI schemes.

In 1998, he became a Director. A three-year spell in KPMG’s Dublin office followed (from 2000 to 2003) where he was involved in acquisitions throughout Europe and in the Irish market, property financing, and heavy duty infrastructure work. Projects included Ireland’s first PPP hard toll road and the outline business case for Dublin Metro and exposure to numerous dotcom projects. It was “a very good time to go to Dublin”, he recalls.

Most of his work is now in Northern Ireland. In September 2008, he was involved in the £132.5 million sale of Belfast City Airport and he is currently advising on a number of fundraisings and M&A transactions, along with the procurement of the new campus for Belfast Metropolitan College and other infrastructure projects.

Paul was appointed a Partner in the Belfast office in 2003 and finds that “effectively work drives me”. An Instonian and Ireland hockey player (having over 60 caps), he coached until last year and still takes a keen interest in the sport. Other pastimes include golf, fishing and currently potty-training! He is married to Jane, who is a partner in a local law firm, and they have three children “all under three-and-a-half” – Jack, Michael and Frank. Jack was born in 2005 and spent a long time in a London hospital after a major heart operation and where he overcame the most incredible challenges; an experience which Paul describes as “life changing”. He describes Jack as a “constant source of inspiration, for me; he helps me to keep things in perspective”.

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