The Impact Of Brexit On M&a

The UKs vote for Brexit in 2016 has led to a high degree of uncertainty, and many businesses both regionally and nationally are rethinking their M&A strategy in light of the referendum decision

The big question at the moment is what impact Brexit will have on the M&A market overall with both opportunities and challenges being presented. A significant trend that has emerged is the increase in cross border transactions as UK targets have become far more attractive to overseas buyers due to the decline in the value of sterling since the referendum vote. For example, there has been huge interest in UK assets from US buyers.

Jimmy Choo being acquired by US fashion brand Michael Kors for £896 million, Worldpay Group, the UK’s leading payments processor, agreed a £9.1 billion deal to be acquired by US rival Vantiv. Sterling has also eroded against the Japense Yen, leading to interest from Japanese based companies, the most notably example being the acquisition of Arm Holdings by SoftBank for $32 billion. Equally there has been weakening of trading of some UK businesses that are exposed to currency movements as well as more general uncertainties of trading in the post referendum period. Those uncertainties need to be planned for and dealt with in the context of planning any transaction.

We have also seen some transaction processes taking longer than usual, as deal makers seek to establish how the trading environment will look both pre and post Brexit and to ensure they optimise the timing of an exit for Vendors. Vendors and their adviser will be considering both how to maximise value and protect value with these uncertainties adding to the challenges of M&A. Finally we should also remember that at times of higher uncertainty and volatility in markets this can be an opportunity, with buyers ready to take advantage of good deals. Despite the uncertainties created by Brexit the M&A market has continued to be robust.

Deals are still being done, with attractive, strategic and synergetic transactions still taking place at premium valuations. Trade buyers, both domestic and overseas, and Private Equity buyers remain extremely active. There remains a high level of domestic only M&A including acquisitions of UK businesses by private equity funds.

Whilst Brexit is having some impact on the M&A market its overall impact remains unclear and M&A professionals must assess each deal on a case by case basis to consider its impact and plan accordingly to get the best results for their clients. At Cavu Corporate Finance, we have been involved in some of the biggest deals in the region including the acquisition of Fastflow Group by Elysian Capital and management (CEO Neil Armstrong above with Shawn Bone) and the £25m private equity investment into Fairstone by Synova Capital.

The North East has also recently seen O’Briens sold to Biffa in a £35m deal and Baird Capital invest in CAV Advanced Technologies. This signifies that both trade and private equity funds remain keen to invest in good quality assets despite the background and challenges presented by Brexit.