M&A and private equity deal values dip despite Brexit bargain hunt

William Turvill
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The UK voted to leave the European Union on 23 June (Source: Getty)

UK-targeted mergers and acquisitions (M&A) activity has been boosted by the falling value of sterling since the Brexit vote, a new report has found.

But Mergermarket’s review of the third quarter of 2016 found domestic dealmaking remains weak. The report also focused on private equity activity, finding that projects targeting UK companies have been put on hold since the UK’s Brexit vote.

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In total, between the first and third quarters of 2016, inbound deal values totalled £70bn, down 44.5 per cent on the same period in 2015. Domestic activity was down 56.3 per cent to £13.1bn. But outbound deals, in which UK companies look to buy overseas, was up 1.6 per cent to £38.5bn.

In the private equity area, buyouts were down 72.4 per cent to £5.7bn, while exits were down 43.7 per cent to £20.8bn.

“The immediate free fall in sterling following Brexit caused opportunistic dealmakers to engage in a bargain hunt for UK assets,” the report said.

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Looking forward to the rest of 2016, Piers Prichard Jones, co-head of M&A in London at law firm Freshfields Bruckhaus Deringer, told City A.M.: “Overseas bidders are looking at UK targets where there is a robust strategic rationale for the deal. Many will see sterling’s decline as an opportunity and it may be the catalyst for moving now rather than waiting.”

On private equity, the report said: “According to Mergermarket intelligence, private equity firms targeting UK companies have been freezing projects since the EU referendum vote following difficulty securing financing, while others have put exits on hold. Some firms may reassess their investment strategy, and investors looking to employ capital could instead look towards private equity houses that focus on non-UK assets.”

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