U.K. M&A May Rebound When Brexit Details Become Clearer

World Securities Law Report informs you of developments in the regulation of transactions involving securities around the world. It provides expert analysis and practical guidance, with...

By Che Odom

June 28 — Companies interested in buying U.K. corporations may see their appetites return when policy-makers work out details of the U.K.'s departure from the European Union, corporate attorneys told Bloomberg BNA.

“All that is clear is that there was a vote to leave the EU and the prime minister announced that he would resign,” Peter Cohen-Millstein, a partner in the New York office of Linklaters who represents domestic and international companies, said. “As the path forward becomes more clear, the markets will calm down a bit.”

Data from Bloomberg Law Corporate Transactions shows that merger and acquisition deal volume in the U.K. decreased dramatically over the last three quarters, from $133 billion in the last quarter of 2015, to $39 billion in the first quarter of this year, to a little more than $11 billion so far in the quarter ending June 23.

By comparison, U.S. deal volume dropped from $790 billion in the fourth quarter of 2015 to $410 billion in the first quarter of this year, but increased to $465 billion so far this quarter.

The U.S. data covers transactions valued at more than $100 million, while the U.K. data covers all deals.


Uncertainty over the future, including whether U.K.'s Parliament decides to ignore the vote and remain in the EU, is stalling the market for some deals, attorneys said.

Richard Brown, a partner in the London office of Allen & Overy, told Bloomberg BNA that his firm began to see a slowdown in the first quarter of the year and thought then that it could be due to Brexit concerns.

The “ensuing uncertainty will lead to a significant slowdown” in the market for deals, Brown said.

Attorneys also told Bloomberg BNA that Brexit necessitates changes to law and trade agreements to facilitate cross-border transactions.

Brexit vote

The terms of U.K. trade deals are “up in the air,” Cohen-Millstein said. “In addition to needing to negotiate a new deal between the EU and the U.K., the U.K. will lose the ability to trade under all of the EU’s existing deals, and will need to enter into new arrangements with its existing trade partners.”

Legal Woes

The uncertainty goes far beyond M&A and trade agreements. Cohen-Millstein said one of his clients, interested in a new licensing transaction in the EU, was concerned about how the British vote would impact that matter.

Companies may need to “look at historical deals to see whether there are elements of them that need to be addressed,” he said.

In the technology sector, the U.K. will have to show that it can offer a level of protection to data moving in and out of its borders that is comparable to that under the EU's Data Protection Directive, which goes into effect in 2018, said Jane Finlayson-Brown, an Allen & Overy partner specializing in transfers of data in outsourcing projects and M&A transactions.

This will require a change to U.K. law, she told Bloomberg BNA.

The market will be looking for signals of stability, including the U.K. and EU agreeing on what this exit will look like, Cohen-Millstein said.

“While there are risks associated with everything, in time, more certainty will help stabilize the markets,” he said.

To contact the reporter on this story: Che Odom in Washington at codom@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.