Private equity boss predicts autumn M&A activity boost for City of London

William Turvill
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3i chief executive Simon Borrows is forecasting an uplift in activity in the City after the summer

The chief executive of private equity firm 3i expects the City to experience a pick-up in mergers and acquisitions (M&A) activity after the summer.

The company’s share price was up more than two per cent to 624p on Wednesday after it reported a “solid start” to the 2016/17 year in the three months to 30 June.

Its net asset value per share rose 16.4 per cent year on year to 538p. It also reported private equity-generated cash proceeds of £438m for the quarter.

Read more: What Brexit means for UK M&A: Experts expect further drop in activity

Speaking to City A.M., 3i chief executive Simon Borrows said “it really is life as normal for us” after the Brexit vote. The company’s share price initially dipped after the UK’s Leave vote – by 16 per cent from 562p on 23 June to 470p on 27 June – but has since recovered and is trading at its highest level since 2008.

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Borrows said: “We haven’t seen any significant impact [from the Brexit vote]. We had a very busy first quarter, and realisation and investment activity has continued beyond 30 June. We at 3i haven’t seen any reduction in activity.”

He added: “More broadly, I think I sense that the City could be reasonably active in the autumn, once the summer holidays are over…

Read more: UK private equity firm 3i brushes up €102m from cosmetic business sale

“Now the referendum’s out the way, now that we have a new Tory government with a particular sense of purpose, and the stock markets have performed well and results have been reasonable, I think it bodes well for increased activity in the autumn.”

After a record 2015 for global deal activity, there has been a slowdown in 2016, including in the UK, with experts pointing to uncertainty around the EU referendum as a cause in the first half of the year.

And with more uncertainty over what the UK’s Brexit vote means, PwC, EY, Mergermarket and others predicted that M&A would slow further in the second half of the year.

However, last week Japan’s SoftBank announced a £24.3bn deal for UK chip maker Arm. Analysts suggested that UK companies could become more attractive to foreign companies because of a weakened sterling following the Brexit vote.

Asked whether he believed this could lead to more activity, Borrows said: “I wouldn’t be at all surprised to see other UK or sterling assets purchased by international investors or companies.”