Political uncertainty in the UK has been a hot topic for the last year, particularly due to Brexit delays. This has had an impact on dealmaking throughout Europe in 2019, however, as we enter into 2020, greater optimism is expected with regards to deal activity.
So, what are the reasons for this positive outlook, and what are the reasons for the UK’s deal appeal?
It was no coincidence after the election result in December, and the news that a majority government would be in charge for the next four years, that the pound sterling surged, as the result marked a return to political stability.
From this result, there held promise for the business community, as stocks rose and a boom is anticipated under Boris Johnson’s leadership. As well, it provided a stable tax environment, an important factor for individual sellers in their decision making.
The result of the general election in December also made Brexit a certainty. While Brexit might not be welcome news for everyone, EU companies are likely to look at acquiring UK companies to gain a foothold in the market. In the long-term, the UK will look towards North America instead of the EU, which could potentially drive deal growth.
Availability of Quality Assets
In a report by Stephenson Harwood, domestic and international investors were surveyed to understand their attitudes towards dealmaking in the UK. From the survey, one of the key findings was that the UK was an attractive place to conduct deals because of quality of technology and IP, macro-economic stability and a skilled labour force. In fact, reports since the above have highlighted the strength in the UK technology sector with a report by Merrill Corporation finding that the UK and Ireland’s technology, media and telecommunications sector was the most active in the region. GlobalData also released figures showing the UK as the top inbound M&A destination for technology companies globally by value, with disclosed values topping US $5bn in 2018.
Amount of Capital Available
Over the past decade, dry powder in private equity has grown by 50%, with 2019 marking another record year for dry powder. As many funders did not hit their investment targets in 2019, there are ample opportunities for companies to borrow from, partner with, or sell to a private equity firm.
Overall, with a return to political stability, market conditions are improving and with appetite from private equity, particularly as the UK is attractive in terms of technology, the UK is proving that it has deal appeal.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkIntl.com
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Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximising solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.