European M&A "remarkably robust" in 2016, despite Brexit uncertainty, but at risk from elections this year

 
William Turvill
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The Euro Comes Under Increasing Pressure
French and German elections are coming up later this year (Source: Getty)

European mergers and acquisitions (M&A) activity remained “remarkably robust” in 2016, despite the UK’s Brexit vote, an international law firm has said.

But deal activity across the continent could be hit this year “due to political uncertainty caused by the French, Dutch and German elections as well as the impact of Brexit this year”, according to a study by CMS.

The firm's European M&A Study 2017 also noted, however, that the UK has experienced a “very active” start to the year, with total deal value up 25 per cent in the first quarter compared with the same period last year.

Read more: It's official: Deal volumes hit highest level since the financial crisis

Martin Mendelssohn, CMS UK corporate partner, said: “[T]here is actual or rumoured takeover activity in a number of sectors including financial services, pharma, consumer and energy. Public market equity value is giving listed companies a lot of confidence.”

But he added: “In the private M&A market, however, buyers are increasingly showing a cautious attitude by the way risk is allocated between sellers and buyers on private M&A deals as they contemplate medium term uncertainty due to the unknown consequences of Brexit.”

Commenting on Europe more generally, Stefan Brunnschweiler, head of the CMS corporate/M&A group, said: “Buyers are becoming more cautious. The 2016 results show all the signs of buyers taking on less risk and leaving more residual risk with sellers, reversing the steady trend in favour of sellers seen since 2010.”

Read more: One in four UK deals broke down last year, new M&A figures show

He added: “While companies will still have to deal with business challenges such as digitisation and changing business models, they will also be faced with a certain amount of political uncertainty caused by the French, Dutch and German elections as well as the impact of Brexit this year.

“However, we believe that European M&A will continue to provide opportunities in 2017.”

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