Notwithstanding the political doom and gloom in the UK, M&A in 2017 has been robust, continuing a run which stretches back to 2014.
There are a number of factors at play here.
Low interest rates and treasury management means corporates have money to burn. You either pay bigger dividends, buy back shares, invest in green sites or buy. Corporates have been buying and not just in the UK. Brexit considerations have caused boards to think about life after the EU and therefore opportunities outside the UK have been sought not just as a currency hedge but also from a customer /market perspective.
Talking of currencies, the devalution in sterling has made acquisitions more expensive overseas but has also led to more overseas investors in the UK. The reverse psychology of Brexit means EU companies want to ensure they have access to the UK post Brexit, without the fear of tariffs and customs.
Financial firepower with money to burn has meant private equity houses have been active both with new investments but also with a significant increase in bolt-ons. While the larger PE funds may be setting up Asia Funds the mid-size PE firms are still fishing actively in the European pool.
Some entrepreneurs have decided it is time to sell. Brexit, higher personal taxes, robust multiples and the combination of the above factors have caused more family owned businesses to consider longer term options.
Low corporation tax rates have attracted companies into the UK notwithstanding Brexit and rather than just use the UK as a tax haven they have put down roots by investing via M&A.
Notwithstanding the recent terrorist activities the UK is also seen as a stable liberal economy with less regulation. This has attracted start-ups in a number of sectors; health, tech, digital, media and the UK industrial strategy if implemented will also cause clusters effects around the country which will undoubtedly create venture money inflow as well as more cluster M&A.
So cautious optimism so far for the first six months of 2017. What will the summer bring ?
UK mergers and acquisitions activity defy Brexit concerns