Prospective dealmakers put off by tightening UK regulation – CityAM : CityAM

A survey of dealmakers revealed widespread concern about upcoming changes to the UK’s regulatory environment which threaten to halt a flurry of activity seen during the pandemic.

Cheap valuations of London listed companies post-Brexit have turned the UK into a prime location for dealmaking with approximately £166bn of merger and acquisition deals completed so far in 2021, the highest figure since 2015.

However, a survey of 100 dealmakers, commissioned by DRD Partnership, found that 70 per cent of respondents are concerned that upcoming regulation will make deals more difficult while three quarters accused the CMA of overstepping.

DRD Partnership’s Head of Competition and Anti-Trust, Jon McLeod, said: ”At a time when the UK is experiencing a relative boom in transactions, there is real discomfort among dealmakers that moves to tighten the regulatory environment may unwittingly create a hostile climate for future deals.”

Of particular concern are upcoming changes under the National Security & Investment Act which will give the Business Secretary say over changes of control amounting to as little as 12.5 per cent in British companies. A total of 73 per cent of respondents said the changes would make it more difficult to attract foreign capital.

Dealmakers were also skeptical of the Subsidy Control Bill, which is intended to replace the previous EU state aid rules: 70 per cent of respondents agreed the Bill creates a more complex and less predictable regime than previous State Aid arrangements while 77 per cent said it would make it harder to allocate capital to poorer regions of the UK.

The CMA too came under fire with Jon McLeod warning that the watchdog’s “broad interpretation of its jurisdictional powers” adds “complexity and uncertainty to cross-border deals.”

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