Yesterday, Theresa May and her cabinet agreed to a draft agreement on Britain’s withdrawal from the European Union, and it is now pending approval from MPs and the other EU member states.
The agreement hasn’t come without its perils, with a series of resignations, but there are positives for business on the agreement so far.
The main positive for businesses is that there is a degree of certainty over the deal. Lobby groups including the Institute of Directors and the British Retail Consortium have stated that any certainty over Britain’s future relationship with the EU, if only small, will help businesses.
Certainty has been cemented by the agreement of a 21 month transition period. This means that most trading rules for companies in Britain will remain the same.
It also means that, if passed, there will not be a ‘no deal’ scenario which Carolyn Fairbairn, director-general of the CBI said would be a “nightmare precipice” for business.
A rise in the pound and euro was also welcomed, but with the recent resignations, the pound has since declined – although the increase was capped anyhow as the draft agreement still needs to be approved by parliament, with foreign exchange strategists at Commerzbank stating, “we will only see a significantly positive reaction in the GBP exchange rates once an agreement has been accepted and signed by all sides.”
Without this approval, there will be no longer certainty, and a new agreement will have to be drafted, or risk a ‘no deal’ scenario.
What does this mean for M&A?
While a deal being agreed for business is preferable, M&A so far has fared well despite the economic uncertainties of Brexit. The market this year has been strong, with recent analysis by BDO LLP showing that 619 transactions were completed in Q3 and that value is strong, with a trend of double digit EBITDA multiples, showing the strength of the current M&A market, possibly as European buyers have acquired UK businesses to secure a foothold ahead of Brexit.
As well, a decline in pound sterling isn’t all bad for M&A, as this makes UK companies cheaper for international acquirers.
WE ARE READY WHEN YOU ARE
Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com
ABOUT BENCHMARK INTERNATIONAL
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 $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.