Brexit's uncertain future is leaving investors and businesses holding their collective breath. With the future of of European business cloudy, how does the near future of M&A look going forward?
The future of M&A activity is unclear with the Brexit situation still unresolved. There have been two types of reactions to this uncertainty. The first, and perhaps most obvious, is caution. Many CEOs are taking this time of obscurity and volatility to improve their core business, and to grow organically. The second approach has been to acquire more. With private equity houses and international investors still motivated to take risks and acquire assets in the zero interest rate environment in Europe, there is still some promise in M&A activity. Here are three additional key takeaways concerning the looming Brexit uncertainty:
Brexit hits expectations- Two-thirds of respondents believe that European M&A will fall when asked in the aftermath of the Brexit vote, compared with just 18% in our survey earlier in the year. Dealmakers are wary of the uncertainty, which could potentially pause activity both in the UK and beyond as companies wait for the dust to settle.
Bargain hunters- An upside of the Brexit vote for buyers is its effect on the price of assets. Post-Brexit, 54% say that undervalued targets will be one of the greatest buy-side drivers, compared with 39% before the vote. Among corporates and private equity firms considering acquisitions, favourable prices are seen as a key motivator by almost nine in ten.
Cross-border Drive- While European dealmakers may have hit the brakes, the sentiment for international buyers remains strong. Almost four-fifths anticipate more cross-border M&A into Europe next year, while 61% think the value of these deals will increase. Buyers from North America and China in particular will look to snap up assets to fuel overseas growth.
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