The coronavirus pandemic and Brexit hampered deal activity between the UK and continental Europe in 2020, with the number of European businesses bought by UK acquirers falling by nearly a third.
The number of takeovers by UK acquirers of continental European businesses fell 30% from 488 in 2019 to 342 in 2020, new research has found.
The overall number of deals targeting continental European companies fell by 27 per cent from 6,665 to 4,843 over the same period, but the UK’s decline was notably sharper than the US’s, which fell by a quarter in the same period.
Global consulting firm Accuracy, which put together the research, said concerns over the potential impact of a no-deal Brexit deterred UK corporates from making purchases of European businesses last year. Additionally, the shock to the economy caused by the Covid-19 lockdown reduced the number of deals across Europe.
However, it noted deals from UK businesses targeting European companies fell even more rapidly than overall deal numbers across all countries.
Private equity more active
Accuracy said the risks that a potential no-deal Brexit would bring, such as restricting the free movement of business executives between the UK and EU, caused deal activity to slow down.
This was exacerbated by uncertainty about potential divergence between UK and EU laws from January 1 2021 and what that would mean for businesses.
Leontine Koens-Betz, managing partner at Accuracy Netherlands, said: “Businesses looking to undertake transactions have had to contend with bureaucratic barriers and logistical difficulties which have made completing a takeover even more complex.
“However, looking ahead, we may see a recovery in deal activity from UK companies who are looking to build up their base in Europe to bypass the problems of being outside of the single market.”
Accuracy’s research also showed takeovers in Europe by UK private equity funds held up better than those by UK corporates as a whole.
The proportion of takeovers by UK-based PE houses increased from 43 per cent in 2019 to 47 per cent in 2020. The number of deals by UK PE funds fell by a smaller 23 per cent from 209 in 2019 to 160 in 2020.
The consultancy said the financial firepower that PE funds have at their disposal had allowed them to move forward with acquisitions when corporate acquirers have been more reluctant to.