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Fewer business deals being made in UK post Brexit, report suggests

Published 11/08/2016

The ARM Holdings takeover by Japan's Softbank was one of the post-Brexit successes.
The ARM Holdings takeover by Japan's Softbank was one of the post-Brexit successes.

Brexit uncertainty has hit corporate deal-making in the UK as figures show a sharp fall in merger and acquisition activity since the vote to leave the European Union.

The latest Intralinks Deal Flow Predictor report shows early stage M&A activity fell by 1.4% in the three months to June 30 and as much as 7.4% in the month since the Brexit decision.

This compares with a 15.7% surge in activity across the Europe, Middle East and Africa region in the second quarter and a 19.8% jump, excluding the UK, in the month after the referendum.

Intralinks monitors transactions in the preparation stage or those that have reached due diligence - which are generally around six months off from being announced.

Philip Whitchelo, vice president of strategy and product marketing at Intralinks, said UK firms "may have too much risk attached for some acquirers, despite their relative attractiveness after the sharp drop in the value of the pound".

But despite the findings, there have already been a number of deals since the EU referendum and not all have been put down to Brexit bargain-hunting.

SoftBank's £24 billion mega-takeover for Apple chip maker ARM Holdings last month showed "Britain is open for business", according to Theresa May.

The Prime Minister was quick to declare that the swoop by the Japanese firm for one of the UK's biggest technology companies proved the country remained as attractive as ever to overseas investors.

And it came despite a rise in ARM's shares after the Brexit vote, thanks to its revenue stream outside the UK.

Other deals include South African retailer Steinhoff International's takeover of Poundland, which was announced after the referendum, although discussions were under way long before the vote.

Cinema chain Odeon & UCI was also snapped up by US firm AMC Entertainment for £921 million in the same week, with its new owner confirming the plunging pound was a major factor.

Mr Whitchelo said the impact of the referendum decision was not holding back deals across the rest of Europe, which was outperforming global M&A, which saw a meagre 1.2% rise in activity over the second quarter.

Deal-making activity in the US fell by a marked 11.2% between April and June as firms paused for breath ahead of potential further interest rate rises and uncertainty caused by the Presidential Election in November.

Mr Whitchelo added: "The fallout from the UK's vote for Brexit is certainly top of mind for many firms, but we are also seeing European dealmakers adopting a 'keep calm and carry on' approach, and starting more deals than last year."

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