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5 Reasons why Brexit might not be so bad for M&A

Despite recent evidence of Brexit hitting M&A it may not be so bad after all.    Here's five reasons why.

1 Liquidity

Companies might be put off attempting larger deals due to the difficulty in raising sterling debt.  Also there’s evidence of some Brexit planning being rolled out with stockpiling of goods and relocation of corporate head offices outside the UK.

But these things are seen mostly at the really large end of the market, and smaller deals should hold up.

Why so?  Because confidence and cash are key drivers of M&A.  Whilst confidence may be in relatively short supply, at least in some markets, there’s still lots of cash around.  Companies and PE houses are holding record bumper levels of dry powder so the Global M&A market isn’t about to grind to a halt, even some fear the UK could.

Given all that corporate liquidity smaller deals especially technology or strategically driven deals should not be hit as hard if at all.  

Brexit2 Specific sectors will hold up

The uptick in inbound European M&A activity in 3Q18 should continue in sectors which remain relatively unaffected by the current tumult.  It’s hard to predict which sectors those might be!  But it’s safe to say that UK technology companies, and other businesses with a real edge, market access or strong business proposition are likely to remain attractive to potential purchasers.  

So I’d imagine that the Cambridge tech cluster and other areas of excellence should continue to see activity.

3 Change as a driver for M&A

Change often drives opportunity, capital flows and M&A activity.  And companies seek to capitalise on disruptive factors by buying and selling companies.

4 The UK as an attractive economy/jurisdiction in which to do business

English law will remains attractive to international companies. 

5 Continued Sterling weakness

A hard Brexit will probably punish the value of Sterling, but as we saw after the referendum the currency effect of a “cheaper” British pound has been a real driver for M&A deals.  Overseas buyers particularly from US, Europe and China have been very active.  


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