"Corporate raiders” in a “stampede of acquirers” “crushing UK innovation” – the rhetoric around foreign takeovers in the past few months hasn’t been warm and welcoming in some parts.
While alarmist in tone, this narrative is in part borne out by data – stats recently released by Thomson Reuters point to an increase in the value of foreign takeovers in the month after the UK’s vote to leave the EU. Almost 60 transactions totalling $34.5bn were struck by foreign companies for British firms in the month after 23 June, compared with 79 deals worth $4.3bn in the month leading up to the vote.
The multi-billion pound takeover of Arm Holdings by Japan’s Softbank has obviously made the headlines (and dominates the above figures), but similar UK “trophy assets” such as our football clubs are also coming under consideration by foreign buyers (last month’s sale of Wolverhampton Wanderers FC to China’s Fosun Group – a deal which I advised on – being a case in point).
Are these deals really foreign buyers “swooping” in on the British family silver at a time when we are vulnerable to attack, as the hyperbole suggests? Undoubtedly for overseas businesses considering an investment in the UK, the fall in the value of sterling offers significant opportunities to acquire firms more cheaply.
However, there is more to it than valuation. I would suggest that these are positive indications of British companies playing their part on the world stage, going beyond Europe to forge ties with exciting businesses in some of the world’s major economies. This is going to become increasingly important when the UK does exit the EU.
The types of firms up for grabs are understandably tech companies and well-known brands that lead the way in creating and sustaining a global market – the boom in overseas interest in football coming as a result of the world’s love for our globally renowned clubs. The factors that contribute to a well-loved national brand can also turn it into a true global player – we shouldn’t be reticent about putting these businesses forward at a time when the UK is inevitably going to need to reinvent its offering to the global market.
The key to whether these deals fly for our trophy companies is the way both sides approach negotiations. The much-maligned takeover of Cadbury by US company Kraft in 2010 is an example – the hostile takeover bid faced management resistance, government intervention and even today the same narrative plays out in the public debate about the changing taste of Creme Eggs, certainly leaving a bad taste in the mouth.
In contrast, the UK government was quick to give its blessing to the Arm Holdings tie up, and certainly Fosun Group is keen to work very closely with Wolverhampton’s existing management to support and evolve the club.
Ultimately while uncertainty still pervades and we are in the midst of the City’s holiday season, we are beginning to see a way forward for UK Plc over a month on from the Brexit vote result. While it is unlikely that the rate of M&A will continue to rise in the next two years, British companies should feel comfortable about what they can offer on the world stage.