Fear not – a flurry of inbound mergers and acquisitions is good news for post-Brexit Britain
Good news for bankers! Dealmaking this year has jumped to levels close to a pre-credit-crunch peak reached more than a decade ago.
That’s according to figures published today by accountancy giant EY. Mergers and acquisitions involving UK parties totalled a whopping $120bn (£85bn) in the first quarter of 2018, eclipsing the $51bn recorded in the final three months of last year.
Furthermore, the City’s pipeline for initial public offerings also looks strong. While plans for Saudi Aramco are up in the air, the long-term health of UK capital-raising depends on a constant stream of listings that may not be blockbuster but, combined, form the lifeblood of the London market.
However, such an outlook depends on a relatively benign political environment. The aforementioned data from EY shows an exceptional spike in inbound M&A; in other words, UK assets being snapped up by foreign buyers. The value of inbound transactions soared from $11bn in the final quarter of 2017 to $67bn at the start of the current year.
With the characteristic understatement of a beancounter, EY’s Steve Ivermee explains: “The significant increase in inbound transactions is likely to lead to a new environment for M&A and dealmakers. Some of these deals are likely to face increased scrutiny by regulators, government and the public about their purpose, which will need to extend beyond cost savings.”
He advises dealmakers thus: “Articulating this narrative in a compelling way to ensure all stakeholders are onside will become increasingly key to help ensure deals are done.”
Read more: The government has warned it may block Melrose’s takeover of GKN
This softly-phrased suggestion carries portentous undertones. Many in the business world look at the furore surrounding Melrose’s attempted takeover GKN (a deal between two UK companies) and fear that a Theresa May-led government could start to take a more interventionist approach to M&A.
Last week we used this space to argue that the UK cannot remain “open for business” and simultaneously ramp up barriers to investors. M&A may be good for bankers, but it is also in the interests of the whole economy to allow the allocation of capital to be determined by the owners of that capital – whichever way it is travelling. The extent of inbound M&A, nearly two years after the referendum, is a positive sign for the attractiveness of post-Brexit Britain. The last thing we need is political opposition getting in its way.