19/07/2024
Brexit m&a opportunities
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“Navigating Post-Brexit M&A: Opportunities and Challenges”

Ever wondered about the UK’s M&A scene after Brexit?

The scene has new chances and hurdles for businesses and investors. Scott Dylan, from Inc & Co, calls this a transforming time. Changes in rules and the market drive this transformation.

Post-Brexit, the UK’s CMA is keeping a closer eye on things. It’s 35% busier than before 2015. They got £2.8 million more a year to make sure the UK stays a good place for business, despite the uncertainties.

Different sectors are seeing varied effects. In facilities management, deals jumped from £3.2 to £4.4 billion in six months. Deals in the public sector reached £1.1 billion in the third quarter of 2023. The finance sector saw a 9% drop, but banking surged from £4.3 to £6.7 billion.

Inward M&A is growing, with £12.7 billion early in 2023. Tech leads the charge, making up 35% of all M&A. Though challenges exist, the prospects are vast for those ready to face this new world.

Understanding the Post-Brexit M&A Landscape

The UK’s post-Brexit M&A scene has changed, especially in regulatory control and investment trends. The Competition and Markets Authority (CMA) now reviews around 1,830 reports each year. This is seen in areas like communications and energy. The work and checks have increased clearly.

New post-Brexit rules mean more merger control filings, with about 50 more transactions yearly for the CMA. This shows the growing complexity in UK’s M&A activities.

Many thought Brexit would lower UK’s M&A activities. Yet, the falling value of Sterling and the EU-UK Withdrawal Agreement lessened these fears. Before COVID-19 hit, the UK saw strong inward M&A investment in 2019. By 2021, more foreign buyers were interested in the UK market.

Cross-border M&A has kept a strong position globally. In 2018, Japan’s M&A was at $184 billion. This happened even though China’s M&A activities fell by 23%. Telecommunications, media, technology, and healthcare led the cross-border M&A. They made up nearly 30% of the market.

The M&A scene is evolving. Companies must understand new UK laws, like the National Security and Investment Act 2021. This law gives the government more power to review certain deals. Knowing post-Brexit laws is vital. It helps companies to make the most of M&A chances in the UK. This keeps the UK appealing for global and local investments.

Emerging M&A Opportunities in the UK Market

Post-Brexit, the UK market reveals good chances for M&A activities. Despite uncertainties, it remains a key spot for these investments. Large deals like Comcast’s GBP 37 billion buy of Sky plc in 2018 show this trend.

The facilities management sector grew to GBP 4.4 billion recently. The public sector also did well, with GBP 1.1 billion in deals in Q3 of 2023. These moves show the UK’s M&A scene is vigorous and diverse.

The tech sector’s growth is especially strong. Greene King’s 2019 sale for GBP 2.7 billion boosted investor trust.

Yet, Brexit brings challenges, mainly in regulation. The EU might add British Territories to its tax haven blacklist, complicating things. Still, the UK is favoured for laws in shipping and other industries, keeping its non-EU market status strong.

Financial services saw big changes due to the pound’s value drop. M&A deals stayed steady, but their total value dropped slightly in 2023. Take-private deals are becoming more popular, showing a shift towards private ownership.

Firms like Latham & Watkins playing advisor in big M&A deals such as Abcam’s sale indicate the UK’s high-value deal appeal.

Challenges in Navigating Post-Brexit Regulatory Changes

Brexit has changed the UK’s mergers and acquisitions (M&A) scene greatly. The Competition and Markets Authority (CMA) now reviews 40% more deals, including those with international companies. This highlights the increase in CMA’s importance and the need for businesses to follow complex rules closely.

Regulatory impacts on uk m&a

Now, companies must get approvals from both EU and UK authorities, unlike before. This new process can slow things down or lead to different decisions in the same deal. A key case showing this issue was Sabre-Farelogix, where EU and UK authorities didn’t agree.

Expect the CMA to look at 60-78% more mergers because of Brexit. This means companies face a maze of new rules for their deals to go through. They must understand these changes well to grow their businesses safely in this new setting.

Adapting M&A Strategies Post-Brexit

After Brexit, M&A planning in the UK has changed a lot. UK mergers now need to be more flexible. This change is especially true for digital areas in M&A activities. Last year, the tech sector made up 35% of all M&A deals, showing how important technology is.

Private equity firms are leading in adapting to these changes. They focus on areas where they are very skilled. Also, they are using AI and digital tools more. This helps them check deals better and make transactions smoother.

The public sector saw big growth in Q3 of 2023, with deals reaching £1.1 billion. At the same time, the value of deals in facilities management went up from £3.2 billion to £4.4 billion in just six months. This shows how M&A strategies are changing across different areas after Brexit. The health sector also saw more deals in 2023 compared to 2022, even when other industries were slowing down.

Companies are also taking advantage of new R&D tax rules to boost innovation. This is key for the UK to stay competitive globally in M&A. Going digital in M&A processes is now crucial for growth and dealing with new regulations.

The UK is also focusing on green deals that follow ESG principles. These deals aim for sustainable investment, good for society and investors. With a push towards sustainability and digital innovation, the UK’s M&A scene looks strong, despite Brexit challenges.

Case Studies: Successes and Failures in Post-Brexit M&A Deals

Looking at M&A case studies after Brexit shows both wins and losses in the UK’s deal-making scene. Metro Bank’s recent rescue plan is a prime example. It shows the market’s ups and downs, with strong shareholder support despite big challenges. This situation highlights the need for careful strategic planning in the unpredictable post-Brexit M&A market.

The fall of deals, like Wilko’s, shows how uncertain deals can be now. Companies working across borders in the UK are facing tough scrutiny and instability. This is made even trickier by Brexit’s legal and rule changes.

The failed attempt by Ant Financial to buy MoneyGram points out the challenges of international deals. Market uncertainty and tight regulations are big obstacles. These case studies show the impact of Brexit on Private Equity (PE) firms and their confidence in deals.

Legal issues after Brexit, such as dealing with unforeseen clause changes and new regulations, are still a big problem. To deal with these, doing thorough checks and preparing for different Brexit outcomes is crucial for success in post-Brexit M&A deals.

The Role of Private Equity in Post-Brexit M&A

Private equity has shaped the post-Brexit M&A world greatly. European Private Equity funds have raised €120 billion, showing strong market confidence. Their role is critical, especially in fast-growing areas like Entertainment & Media.

Since June 2016, the UK’s M&A scene has faced ups and downs. M&A deals with UK targets dropped nearly 70% just before the Brexit vote. This showed investors were worried. But, it turned out Brexit didn’t have a big long-term effect on M&A activities.

Private equity influence

Private equity’s strategy has kept investments and synergy going in various sectors. For example, US investment in the UK rose from US$747.43 billion in 2016 to US$890.09 billion by 2020. This shows how important private equity is for a strong M&A market. Also, foreign interest in UK companies has greatly increased in the latter eight months of 2021.

Private equity-backed mergers lead the way in the UK M&A world. The Competition and Markets Authority (CMA) saw a 60-78% increase in workload due to Brexit rules. These changes made private equity firms rethink their strategy.

In the tech world, private equity drives change and plans future M&A methods. Their active role makes sure the UK M&A market stays lively and strong after Brexit.

Brexit M&A Opportunities

Brexit has unveiled many opportunities in UK’s M&A scene. Sectors like tech and media are growing fast post-Brexit. They show strength and potential for significant growth.

Post-Brexit investments into the UK have increased since early 2023. This shows the UK is still an attractive place for investment. The drop in Sterling’s value made UK assets cheaper for foreign investors. This increased M&A activities, especially from the US.

There have been major corporate buys. For example, Comcast’s £37 billion acquisition of Sky plc in 2018. Also, Advent’s GBP 4.1 billion purchase of Cobham plc in 2020. These deals show strong corporate acquisition activity post-Brexit.

In the last eight months of 2021, more UK firms were bought by foreign companies than in the past five years. This shows a rise in foreign interest.

The public and facilities management sectors have shown a lot of potentials. The financial sector has seen a rise in banking deals, suggesting capital is being moved strategically within Britain.

While France saw a 17% increase in new projects post-Brexit, the UK continues to lead in tech innovation. This situation offers both challenges and opportunities for UK firms in the M&A space.

Global Perspective: How Brexit Influences International M&A

Brexit changed how countries and companies deal with global business. After the 2016 referendum, the number of deals in the UK fell sharply by almost 70%. This drop happened because companies were waiting to see what would happen next.

Despite this, the UK has bounced back impressively. US investment in the UK increased to US$890.09bn from US$747.43bn between 2016 and 2020. The US led with 389 FDI projects, making it the most influential investor last year.

In the first half of this year, there was a global slowdown in M&A. Deals decreased by 15% and their values fell by 32%. Yet, Europe has been quick to adapt, especially with technology in banking M&A activities.

India showcases the positive aspects of cross-border M&A. The country has seen a big increase in international deals. This shows that the desire for global business remains strong, even with political changes like Brexit.

Mitigating Risks in the Post-Brexit M&A Environment

In the wake of Brexit, managing M&A risks is crucial due to new uncertainties. The UK’s rules have changed from the EU’s, bringing challenges. Diligent checks and strict rule-following are essential. The CMA’s increasing checks, influenced by new laws, highlight the need for thorough risk checks.

The digital, financial services, and life sciences fields were key in UK M&A growth in 2018. Investors are now keener on these areas after Brexit. Yet, handling regulatory rules has become tougher. This has caused delays in nearly a third of big UK deals, sometimes up to 15 months. It’s vital to manage M&A timelines well, as many UK acquisitions do not succeed.

UK consumer business M&A activity fell by 50% in 2018. This shows the impact of lower business investment. Though, North American investors are more open to Brexit-related chances. It’s important to identify potential winners and losers after Brexit. This helps in making smart cross-border investment plans. Some consumer areas may see benefits from higher wages and more spending due to reduced immigration.

Cybersecurity is a big risk in M&A activities, changing at different stages of a deal. On the brighter side, the financial sector is optimistic, thanks to the UK’s Industrial Strategy. In 2022, Phase 1 approvals had an 86% success rate. Yet, Phase 2 investigations have risen dramatically after Brexit, occurring in 85% of cases.

Delays in Phase 2 are common, needing flexible project management. Keeping stakeholders involved is key, shown when 93% of Metro Bank’s shareholders supported a rescue plan. Growing teamwork in the financial sector shows the importance of involving stakeholders to manage the post-Brexit M&A environment well.

Future Outlook: Trends and Predictions for Post-Brexit M&A

The UK’s post-Brexit M&A scene shows a mix of outcomes. Though there was a drop from £191 billion in 2022 to £109 billion in 2023, the deal numbers stayed quite stable. We saw a big focus on UK take-private deals, making up 53% of M&A activities in 2023, up from 46% in 2022.

A key deal was Danaher Corporation’s buyout of Abcam for about $5.7 billion, with advisors Latham & Watkins helping. Private deals will keep leading UK M&A work. This is thanks to smart negotiating and following public takeover rules.

The Financial Conduct Authority’s new listing scheme aims to update for future trends. At the same time, the National Security and Investment Act 2021 made dealings quicker with 93% of transactions getting the nod in the first 30 days. The goal is to keep the market stable and welcoming.

The future M&A focus will likely be on digital tech, like AI and blockchain. These technologies could change how deals are done. There’s also a push from private equity, fuelled by borrowing and innovation, aiming to grow specific industries.

Global M&A has seen a slowdown, marking a third-year decrease by December 2022. But the UK market is holding its own, even with global challenges and uncertainties. The tech industry, making up 35% of 2022’s deals, plays a big part in this steady performance. This sector’s success points to exciting times ahead for UK M&A, filled with new chances and paths in a post-Brexit world.

Conclusion

After Brexit, the UK’s buying and selling of companies changed a lot. There are new challenges but also chances to do well. The laws for checking these deals are stricter, mainly due to the Competition and Markets Authority (CMA). This means the CMA has a lot more work, almost double in some areas.

The outlook for Britain’s economy is still bright, though. There’s been an increase in money coming in from other countries. This is especially true for sectors like tech. Investments from the US in the UK went up, reaching US$890.09bn in 2020 from US$747.43bn in 2016. More and more UK companies were bought by firms from other countries in 2021 than in the last five years, showing that these companies are valued highly.

But the world over, buying and selling companies has slowed down this year. We saw fewer deals and much less money being spent on them. Despite this, the UK stands strong. It has adapted to new rules and used the lower value of its money to attract investors from all over. This shows the UK is able to handle changes and is ready for a diverse and growing market. People who can be flexible and innovative will likely do well in such a setting.

Written by
Scott Dylan
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Scott Dylan

Scott Dylan

Scott Dylan

Scott Dylan is the Co-founder of Inc & Co, a seasoned entrepreneur, investor, and business strategist renowned for his adeptness in turning around struggling companies and driving sustainable growth.

As the Co-Founder of Inc & Co, Scott has been instrumental in the acquisition and revitalization of various businesses across multiple industries, from digital marketing to logistics and retail. With a robust background that includes a mix of creative pursuits and legal studies, Scott brings a unique blend of creativity and strategic rigor to his ventures. Beyond his professional endeavors, he is deeply committed to philanthropy, with a special focus on mental health initiatives and community welfare.

Scott's insights and experiences inform his writings, which aim to inspire and guide other entrepreneurs and business leaders. His blog serves as a platform for sharing his expert strategies, lessons learned, and the latest trends affecting the business world.

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