Monday 11 July 2016 12:47 pm

Referendum uncertainty “significantly weakened” UK’s European M&A market dominance

The UK’s Brexit vote has “destabilised its position as a leading European investment hub”, according to a new mergers and acquisitions (M&A) report.

In the first six months of 2016, dealmakers were “spooked” by the looming EU referendum, with 647 deals worth £41.3bn announced – down from 702 worth £122.9bn in the same period of 2015, according to Mergermarket.

“This crises of confidence significantly weakened the UK’s dominance in Europe’s M&A, with a 17.1 per cent share in total value plummeting from a record 46.5 per cent in 2015,” the report said.

The US was the most active investor in the UK followed by Germany, with Deutsche Boerse agreeing to a “merger of equals” with the London Stock Exchange.

But Mergermarket found China interest “lagged behind, with 14 deals worth £2.4bn, despite its well publicised European acquisition spree”. Instead, the report said, “Chinese dealmakers are… concentrating on high quality German assets”.

Mergermarket expects M&A activity in the UK to be “almost entirely frozen” for the next two to three months “while some dust settles during a traditionally calm summer period”.

However, the report also noted that the low value of sterling could attract opportunistic approaches from foreign companies seeking cut-price UK assets.

The report concluded: “With such high levels of doubt plaguing the markets, long term consequences are hard to predict. However, it seems fair to say that most sectors will ultimately find ways to cope with the transformed European landscape, and that M&A will, as has often been the case, act as a useful tool in this process.

“While the third quarter of 2016 will certainly be quiet in terms of M&A, many dealmakers may decide to keep calm and carry on, with the picture hopefully becoming clearer by the end of the summer.”