Overseas buyers lured by a plunge in the pound are looking to snare British companies on the cheap, ensuring a steady flow of deals since Britain voted to leave the EU and defying expectations of an M&A drought.
Almost 60 transactions totalling $34.5bn (€31.43bn) have been struck by foreign companies for British firms since June 23, according to Thomson Reuters data, compared with 79 deals amounting to $4.3bn in the month leading up to the vote.
This activity — dominated by Japanese group SoftBank’s $32bn swoop for chip designer ARM Holdings — has defied warnings that dealmaking could dry up for a period if Britain backed Brexit, given uncertainty surrounding risks to the economy and access to the EU single market.
The list of British takeovers could grow after the summer, according to bankers who say they are working on possible bids on behalf of foreign companies interested in UK targets.
The SoftBank deal was hailed by the government as a sign of UK economic resilience, prompting new Prime Minister Theresa May to declare the country “open for business”.
But M&A bankers said the post-vote take-overs had more to do with the low valuations of British companies given current exchange rates, rather than confidence in the British economy.
Sterling has taken the brunt of market concern since the Brexit vote on June 23, falling to a 31-year low.
“Clearly this is a buying opportunity,” said Ben Ward, head of UK corporate at law firm Herbert Smith Freehills. “People with strong currencies will no doubt be interested in acquiring sound sterling-denominated assets.”
The initial indications are somewhat at odds with new research carried out by Oxford Economics on behalf of law firm Baker & McKenzie which found the global M&A market could face a deficit of up to $1.6tr in lost deals unless an orderly and swift Brexit process is followed.
The research found that the impact is “disproportionally” felt in the UK and the rest of Europe.
It also noted, however, that that the impact of Brexit is not as global as the 2009 financial crisis and added that there would be no ‘Lehman moment’ as a result of Brexit.
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