M&A activity surge predicted in betting, airline and homebuilding industries after Brexit vote

William Turvill
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International players and private equity houses are likely to be eyeing UK opportunities (Source: Getty)

The UK’s Brexit vote is likely to increase deal activity in the betting industry, among airlines and between homebuilders, new analysis out today suggests.

With the outcome of the Leave vote far from decided, “the only certainty is uncertainty”, the Boston Consulting Group (BCG) report noted.

But the report, “Will Brexit hurt – or help – your M&A plans?”, suggested international players that have previously considered making a move into the UK, private equity houses and other investors are all likely to “take advantage of low valuations in US dollars to gain a stake in the UK market”.

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UK-based companies may also wish to sell businesses in order to “repatriate cash to the UK. For example, UK businesses may look to divest US assets to take advantage of a weak pound or reshape their UK portfolio to minimise complexity and risk.”

Outbound M&A, meanwhile, could slow. “Asset prices outside the UK are now comparatively high, and UK-based businesses will likely focus on managing domestic uncertainty.”

However, on a domestic basis, BCG is anticipating “an increase in consolidation activities in industries that have been negatively affected” by the vote.

The sectors most likely to experience an increase in M&A activity after the vote were named as TV, pubs and restaurants, casinos and betting, homebuilding, building materials, healthcare services, commercial insurance, airlines and tourism.

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The sectors most likely to experience a decrease in activity were identified as banking, asset management, e-commerce and discretionary, or non-essential, retail.

“M&A activity will probably halt in banking and consumer finance as uncertainty brought on by Brexit makes asset valuations difficult,” the report said.

“Key drivers of uncertainty for banks include an increase in funding costs, low loan growth, an increase in nonperforming loans, and delays in base rate increases, which depress net interest margins.

“Additionally, capital markets face uncertainty form the potential end of financial passporting.”

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