On June 23, 2016, Britons will be heading to the polls to
determine whether or not the UK should remain a member of the EU.
Given the stakes involved, the referendum is likely to have an
impact on M&A activity in the UK, both before and after the
This is not the first time the UK has held a referendum on this
question. In 1975, the British electorate voted in favour of the UK
remaining a member of the European Economic Community (the
predecessor of the EU) by a majority of 67%.
However, this time the results are expected to be much closer.
Recent opinion polls suggest that both sides are neck and neck,
with those in favour of a British exit from the EU (commonly
referred to as "Brexit")
taking the lead for the first time on June 6th.
Impact on M&A
The referendum will likely impact the timing of deals in the
short-mid term. For example, some prospective buyers of UK targets
may be holding off on M&A activity until after the vote or, in
the event of the UK voting in favour of Brexit, after the terms of
the new relationship with the EU are finalized (negotiations with
the EU are predicted to last several years). In the meantime,
economic and political uncertainty could create a hostile deal
environment for UK M&A.
This uncertainty is exacerbated by the high stakes involved, as
Brexit would mark a major change from the status quo. Laws and
regulations will need to be amended. Prime Minister Cameron
could resign. London could lose its role as a hub for European deal-making. Most
significantly, the British economy will likely be impacted –
according to a recent major survey, nine out of ten of UK's top
economists believe that the British economy will be harmed by
In addition, some analysts believe that sterling is at risk of
falling 15-20% in the event the UK votes in favour of
Brexit. The expected movement of that sterling is supported by its
recent volatility – it dropped on June 6th when
the Brexit camp first took the lead in the opinion polls. While a
weakened sterling could potentially present bargain M&A
opportunities to foreign buyers of UK targets, such currency swings
could significantly change the economics of the deal if the risks
are not properly hedged.
In fact, the uncertainty surrounding the referendum and Brexit
is reflected in the recent slowdown of UK M&A. According to a
recent report by Intralinks, early-stage M&A activity in
the UK only grew by 3% in the first quarter of 2016. In comparison,
the previous quarter (which was prior to a date being set for the
referendum) saw M&A grow by 15%.
This slowdown is consistent with the Scottish experience during
Scotland's referendum for independence from the UK in September
2014. In the quarter leading up to the vote, the total value of UK
M&A deals was 60% lower than the previous quarter.
It is important to keep in mind, however, that businesses are
attracted to the UK because of the country's stable financial,
regulatory and legal systems, and low corporate tax rates, and not because of
its membership in the EU. Assuming that the UK is able to
successfully adapt to a post-Brexit environment, any impact on
M&A caused by Brexit is likely to be limited to the short-mid
term while the UK irons out the details of its new relationship
with the EU.
For more information on Brexit and its potential consequences,
please see here.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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