Brexit uncertainty may be stalling merger and acquisition activity in Europe, but it's also creating the perfect opportunity for investors to get all of their ducks in a row.
Against all expectations, 2018 proved to be a banner year for merger and acquisition activity in Europe. Despite the number of deals decreasing by 18% (to 6,201), a record $767 billion was transacted according to Thomson Reuters Deal Intelligence Data. And surprisingly in the face of Brexit, the United Kingdom is reportedly topping the charts for its business investment attractiveness over the coming year.
Some businesses have chosen to pause and hold back significant amounts of capital as they assess the changing landscape. Others however are harnessing the opportunities in the market to push forward with acquisition plans while taking into account the risks Brexit that brings, and preparing for the different scenarios that could arise.
But the uncertainty won't last forever and your competition won't wait to follow through on their growth and acquisition plans. There are some key factors that if addressed now, will set you up to be able to quickly take advantage of new opportunities as they arise post-Brexit. If you need help with any of the below, be sure to get in touch with our M&A experts.
The need for greater due diligence
The question marks surrounding the details of Brexit have forced businesses to dive deep into risk mitigation. Firms must prepare for any plausible eventuality in order to ensure they can continue to operate with minimal interruption. At the most fundamental level, organisations must assess the positive and negative impacts of Brexit on their current strategy, structure, business model and profitability. We are working with firms which have minimal operating model impacts from Brexit, nonetheless they are facing major revenue and customer retention challenges. Notwithstanding the macro market issues and opportunities, firms should undertake close scrutiny of not only their supply chains, business processes, corporate structure and contracts, but those belonging to the companies they might be looking to acquire as part of their future-proofing strategy.
Do these organisations have the necessary plans in place to continue uninterrupted trade after the UK leaves the EU? What is the value of revenue at risk? Are their supply chains and customer contracts audited and secure? Are their systems configured to deal with new regulatory, tariff and VAT requirements? Will their corporate structure still be fit for purpose?
Another consideration when sizing up a European merger or acquisition in this environment is the availability of talent - are there any risks of staff shortages in the sector post-Brexit?
Look beyond the leave date
There is a lot of focus on the terms under which the UK will leave the EU, but investors must remember to look beyond this to 'stage 2' – the establishment of new trade relationships.
The UK must negotiate a new trade agreement with the EU 27, but it will also be entering into trade talks with the USA, China and virtually every other country in the world. This should be seen as an exciting opportunity for businesses who must be prepared to undertake corporate structure changes – and quickly – to be able to take advantage of new trade deals being done.
Have scalable support at hand
Whatever way the Brexit chips fall, the best situation to be in, is one where you're able to act quickly, smoothly and accurately.
TMF Group with Brexit Partners can provide your M&A transaction or carve out with all the necessary pre and post-Brexit support; from training and working sessions to the rapid execution of all necessary back-office functions; subsidiary management, accounting and tax, HR and payroll.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.