© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - One week on from the EU exit – what do we know? What is the Impact on UK Business and M&A?
Posted 1st July 2016

One week on from the EU exit – what do we know? What is the Impact on UK Business and M&A?

The referendum result created a cloud of shock as uncertainty descended over the UK.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

One week on from the EU exit – what do we know? What is the Impact on UK Business and M&A?
Image

One week on from the EU exit – what do we know? What is the Impact on UK Business and M&A?

The referendum result created a cloud of shock as uncertainty descended over the UK.  Now, a week on, as the dust settles, we are absorbing the facts and making strategic plans to succeed.  Avondale, the multi award winning deal adviser and M&A strategist, takes a look at what we know so far.

·        We are in a period of ambiguity whilst the economy adjusts and new trading relationships (both country and corporate) are formed.  If Article 50 of the Lisbon treaty is invoked, it is likely to be in September this year, under a new Conservative Prime Minister, meaning that we will seek to finalise our exit by September 2018.   Uncertainty is the new certainty but this has been the case since globalisation.  Rapid market change has long since been the norm and business leaders create new techniques, skills and strategies to succeed.

·        Whoever replaces David Cameron will be seeking access to the EU single market whilst reducing freedom of movement. To secure a deal on these lines relies on two elements; firstly, that we are a significant and material trading partner and secondly, that others in Europe with similar thinking on restricting free movement gain political momentum and force a softening of the EU mindset. 

·        The Bank of England (BoE) and the Treasury engaged in extensive contingency planning and were fully prepared for an out vote.  Mark Carney, BoE, stated “Brexit will not cause financial crisis”. As a result, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets. Moreover, as a backstop, and to support the functioning of markets, the BoE stands ready to provide more than £250bn of additional funds through its normal facilities. 

·        The markets are picking up following the initial shock of the exit vote:

  • Having dropped 5% on Monday, the FTSE 100 share index has now climbed to the highest it has been in this year.
  • The FTSE 250 is slowly but surely creeping back, closing 3.2% higher, recovering nearly half of the post Brexit drop. 
  • The pound climbed 1.2% against the dollar having tumbled 11% two days after Brexit and 0.8% up against the euro to €1.2159, prior to the referendum it was trading at €1.30.
  • The pound is still higher than it was three years ago against the Euro
  • Global markets steadied as a result of the BoE pumping in £3.1b into British banks

Richard Gnodde, Co-Chief Executive of Goldman Sachs International, told The Times CEO Summit that markets had functioned well since Friday but were likely to drop further. “There is no panic. Markets are functioning normally. We need to find new levels. The period of price discovery is going to go on for some time,” he said.

Overall we need to look at how people behave and what they do, and not guess, or speculate. For example, if new car sales continue and the supply and demand issues hold value in the housing market, consumers will remain robust which along with exports and financial services are key drivers for our economy.  Many economists predict, at worst, slowdown in growth but not a recession, ie two consecutive quarters of negative growth.

Against this backdrop, what is the Impact on M&A?

·        It is likely that on a macro basis, if we include larger transactions, volumes will drop until the landscape becomes more clearly defined.

·        On a micro basis, in the small and mid-cap markets, transactions are likely to continue. Corporate restructuring is essential in a slow growth economy, and M&A is the main route to shareholder value. 

·        With investment yields poor and interest rates low, the world is awash with capital. Nine private equity firms have called Avondale over the last few days as they have funding in place that still needs a home. It is possible that deal structures become more creative as banks tighten their ‘credit belts’ but this does not stop the fundamental drivers behind deals.

·        Profits will soften in some sectors which actually creates opportunity for those with capital, and a lower value pound will potentially reassure foreign investors.

We need measured, pro-business leadership from the Government in the coming months. Combined with careful negotiation in the EU and calm minds, this should and could enable us to adopt a ‘business as usual’ approach. Indeed, quality assets with sustainable cash-flow and high growth potential become more desirable, not less, in any market slowdown.  Over the coming months, this will hopefully create an increase in demand in the smaller capital M&A market. 

As we’ve said before, UK business in robust, agile and resilient.  This time we have the benefit of over two years to adjust to our new environment, which is plenty of time to implement strategies for success and to thrive rather than just survive in our non-EU status.   This can only be a good thing for M&A.

For further information, please visit Avondale’s website, here.

 

Categories: Finance


You Might Also Like
Read Full PostRead - Eye Icon
Why the Project Management Sector Needs a Shake-Up
Innovation
29/10/2024Why the Project Management Sector Needs a Shake-Up

Failing projects result in wasted resources, time and increased risk for companies. They negatively impact staff, customers and clients, costing businesses dearly.

Read Full PostRead - Eye Icon
Is Facebook Advertising the Right Choice for your Business?
News
29/11/2022Is Facebook Advertising the Right Choice for your Business?

No matter the industry in which your business operates, social media can act as an extremely powerful marketing tool, allowing you to expand your reach and connect with customers who may not have known about your brand otherwise.

Read Full PostRead - Eye Icon
How Does Journalism Work in the Age of Deepfakes?
News
31/01/2024How Does Journalism Work in the Age of Deepfakes?

Trigger Warning: This article mentions child sexual abuse and drug use. Journalism has existed ever since people first banded together in complex social groups. From cave drawings telling primitive band communities about discoveries and new hunting grounds, th

Read Full PostRead - Eye Icon
Lazard Advises Optimal Payments Acquisition of Skrill
Finance
09/06/2015Lazard Advises Optimal Payments Acquisition of Skrill

Lazard Advises Optimal Payments Acquisition of Skrill

Read Full PostRead - Eye Icon
Why Should Businesses Switch To Solar Energy
Innovation
06/04/2023Why Should Businesses Switch To Solar Energy

Electricity is a critical resource for companies to power their machines and equipment. However, with the rising cost of electricity, many businesses are seeking ways to reduce their energy expenses.

Read Full PostRead - Eye Icon
Using Technology to Protect Your Finances in 2023
Finance
01/12/2022Using Technology to Protect Your Finances in 2023

Businesses and individuals across the globe are facing difficulties due to rising inflammation levels in the current geopolitical situation. People are already beginning to make adjustments to combat these difficulties. Here, we will discuss how using technol

Read Full PostRead - Eye Icon
How AI Impacts Mergers And Acquisitions
M&A
12/05/2023How AI Impacts Mergers And Acquisitions

In the fast-changing world of business, mergers and acquisitions (M&A) have become a crucial tool for growth and competitive advantage. As technology advances, artificial intelligence (AI) is playing an increasingly significant role in shaping the M&A landscap

Read Full PostRead - Eye Icon
Phenomenex to be Acquired by Danaher Corporation
M&A
12/10/2016Phenomenex to be Acquired by Danaher Corporation

Phenomenex Inc., a privately held manufacturer and distributor of high-value consumables for the separation sciences, today announced it has signed a definitive agreement to be acquired by Danaher Corporation, a Fortune 150 science and technology company.

Read Full PostRead - Eye Icon
Why Major in Telecommunication Is a Good Idea Today
Strategy
13/02/2024Why Major in Telecommunication Is a Good Idea Today

In an era where communication technology is at the forefront of societal advancement, majoring in telecommunication has become increasingly relevant and appealing.



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have a number of unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow