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'Disorderly' Brexit could cost firms in UK billions

By Staff Reporter

Published 25/07/2016

US law firm Baker & McKenzie's global transactions forecast says the UK and rest of Europe stand to lose out most on corporate activity
US law firm Baker & McKenzie's global transactions forecast says the UK and rest of Europe stand to lose out most on corporate activity

The corporate world could lose out on billions of dollars in merger and acquisition activity unless an "orderly" Brexit takes place, it's claimed today.

US law firm Baker & McKenzie's global transactions forecast says the UK and rest of Europe stand to lose out most on corporate activity.

But the report added that the impact of last month's vote would not be as bad as the financial crisis of 2009.

Tim Gee, London M&A partner at Baker & McKenzie, said London would continue as a major centre for deals.

"Regardless of the volume and value of UK specific deals the primacy of English law for many cross-border deals, even when they don't involve UK assets or business, will continue," he said.

"London will also retain a remarkable concentration of financial, legal and economic talent."

And he said there had been evidence that M&A wasn't coming to a "crashing halt". Last week, UK technology giant Arm Holdings was purchased for £24bn by Japanese giant SoftBank.

Mr Gee said: "There are already some clear upsides - global organisations looking to acquire UK companies will find that a weaker pound makes UK valuations more attractive, although the uncertainty surrounding trade negotiations could deter the more risk averse."

But the firm's report said that corporate activity would be hit even in the event of an orderly Brexit.

With GDP forecasts for the UK halved to 1.1% growth in 2017, M&A transactions will also fall by 33% next year with, a cumulative drop of $240bn (or 24% drop) over the next five years and a recovery only by 2020 to parity with the no Brexit scenario.

Michael DeFranco, global chair of M&A at Baker & McKenzie, said: "An active M&A market is all about confidence and credibility.

"To restore that confidence the UK Government will need to get to grips with the enormous challenge of negotiating a new trading relationship with the EU as quickly as practically possible. Otherwise we move into more dangerous territory."

And in the event of a disorderly exit, the firm predicts that a stronger wave of populism across Europe could unleash more market uncertainty.

Belfast Telegraph

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