As predicted, economic and political uncertainty has created a
hostile deal environment for domestic UK M&A. According to Thomson Reuters, the value of deals between UK
companies has dropped 62% since the vote to a 30-year low. A lack
of large deals may be to blame – not a single domestic deal
worth over US $1 billion has been announced since the vote.
A recent survey of executives by Ernst & Young
(EY Survey) suggests that the slowdown may persist
at least in the short term. The number of UK respondents who said
that they are looking to transact in the next year has dropped from
59% to 48% since May. The respondents cited domestic political
stability and currency volatility as their top concerns.
Interestingly, the respondents did not cite Brexit per se
as a top concern, which suggests that it is the effects of Brexit
rather than the actual decision to leave the EU which concerns UK
companies the most.
Inbound UK M&A down 69%
Immediately following the vote, sterling fell 11% as expected.
It has since fallen even more. However, predictions that a weakened
sterling could boost foreign acquisitions of UK targets have not
held up. Rather, inbound UK M&A has fallen by 69% since the
In addition, the EY Survey reveals that the UK has dropped out
of the top five global M&A destinations for the first time in
the survey's seven year history. The majority of respondents
from countries who previously favoured the UK as a gateway into
Europe, including Japan, US and China, now express a negative
sentiment about investing in the UK. It is apparent that the
bargain M&A opportunities presented by a weakened sterling is
insufficient to overcome the fundamental concerns caused by
Clearly, the British government faces major challenges in the
upcoming months and years as the UK starts to work out its future
relationship with the EU. In the meantime, M&A players will
continue to evaluate whether the transition can provide enough
certainty and stability for a favourable deal environment.
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Up until the recent decision of the Inner House of the Court of Session in Hoe International Limited v Anderson & Aykroyd  CSIH 9 if a contract set out strict conditions on how a notice should be served...
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