Why Thursday's General Election could lead to a UK M&A boom

 
Lucy White
The 2010 General Election - The British Public Go To The Polls
In previous years, M&A activity has shot up in the 90 days following an election (Source: Getty)

As Thursday's General Election approaches, businesses looking for mergers and acquisitions (M&A) may be readying to take advantage of the environment this affords.

In previous years, Thomson Reuters data reveals, M&A has shot up in the 90 days following an election compared with the preceding 90 days.

Deals which involved the purchase of a UK company rose by four per cent in 2015 and eight per cent in 2010 following the elections, while deals where UK buyers hunted outside their homeland have increased following the last three elections.

After the 2005 election there was a jump of 23 per cent in the number of outbound deals compared with the period before the public voted, which escalated to 25 per cent in 2010 and 47 per cent in 2015.

Read more: How the City of London is reacting to the General Election

The positive impact of elections on M&A is not just the case where a Conservative government has taken the reins, the data indicates.

Activity showed a rise in both 1997, when John Major lost out to Tony Blair's Labour party, and in 2010 when the Conservative-Liberal Democrat coalition took over.

Thomson Reuters' data has also painted a positive picture of the UK M&A scene so far following the Brexit vote.

UK involvement in M&A transactions in the period following the referendum has reached its second highest level in nine years, compared to the same period in prior years.

But accountancy firm RSM notes that there are some negatives hidden in this. M&A between UK businesses plummeted by almost 50 per cent in the first quarter of the year compared to the same period in 2016, while interest from foreign buyers also decreased.

The domestic slowdown “may reflect a sense of unease about the future of the UK economy and the uncertainty resulting from Brexit”, said RSM's head of corporate finance Rob Donaldson, who added that “despite the fall in the pound, which has led to some high profile attempts by foreign companies to snap up UK firms, domestic and overseas buyers are proceeding with caution”.

Yet UK businesses seem to be spending freely, according to Thomson Reuters, as announced M&A with any UK involvement has totalled $163.5bn so far in 2017 – more than double the $80.2bn announced at the same time last year.

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