Photo taken on Jan. 29, 2016 shows the UK and EU flags outside the European Commission headquarters in Brussels, Belgium. (Photo/Xinhua)
Despite concerns ahead of the so-called Brexit about business uncertainty, analysts are suggesting an upturn in mergers and acquisitions in the UK is likely to continue through the rest of this year.
This comes on the heels of new stats which show foreign companies have already spent over 34-billion U.S. dollars in the UK in the weeks following the vote to leave the European Union.
Billions of dollars' worth of M and A transactions have been struck since the UK's Brexit referendum on June 23rd, dominated by the $32 billion takeover by Japan's SoftBank of chip designer ARM Holdings. Despite warnings the UK's vote to leave the EU would create chaos and uncertainty for British businesses, the 10 to 15 per cent devaluation of the pound has left some companies ripe for takeover.
"It's effectively a buying opportunity for people with strong currencies compared to the pound."
Ben Ward says he's seen an increasing number of clients, particularly from China, taking a closer look at opportunities in the UK particularly if those businesses are focused on an international market.
"There are a number of Chinese investors who are actively looking at making investments in UK or sterling based assets and I see this because quite often when a company wants to sell an asset or subsidiary they will do an auction process and we're seeing Chinese investors are participating in those auction processes, in the UK. The outcome will depend on a number of things but the interest from China is definitely there.
Deals completed since the referendum include the 800 million dollar takeover of discount chain Poundland by South Africa's Steinhoff group Odeon and UCI cinemas are set to be acquired by America's AMC cinema chain which is owned by China's Dalian Wanda entertainment conglomerate in a 1.2 billion dollar deal. And Wolverhampton wanderers which plays in England's Championship league was bought by China's Fosun group in a $60 million deal.
Dr. Sheik Selim is a senior lecturer in economics at the University of Westminster.
"Poundland being acquired or the Odeon cinemas being acquired, these are still the mid-cap bargain hunting, very much of a transitionary acquisitions and I suspect they might not sustain, they might be sold to others later on."
Some analysts expect this period of bargain hunting to continue in the short term…. But warn Theresa May's new government will have to think carefully as it maps out new post-Brexit trade and competition policies to attract essential investment in large cap companies particularly in the energy and financial sectors.
Dr. Selim again.
"We cannot expect large scale mergers to happen and remain in the UK without making the right sequence of decisions. So only on the basis of falling share prices, only on the basis of low interest rates, only on the basis of low exchange rates, we cannot expect large scale mergers to happen. "
Much of the longer term large-cap m and an activity will depend on the future relationships the UK carves out with major trade partners like its European neighbors, China and the U.S.. The shape of Britain's future trade relations with the rest of the world will take a year or two to emerge. Some businesses have already calculated that is time they cannot afford to stand still… and that business opportunities on offer today are worth the uncertainty ahead.
