Britain’s share of global merger and acquisition activity has tumbled to a record low, as dealmaking freezes amid the uncertainty over the UK’s membership of the EU.
The volume of deals involving UK targets is down almost 70 per cent this year compared with the same period in 2015, with the $57.6bn spent on transactions accounting for only 4 per cent of worldwide M&A.
Global M&A volumes have fallen just 20 per cent from a year ago, according to Thomson Reuters data.
The slowdown is a contrast to 2015, when the UK was home to a number of large takeovers including Royal Dutch Shell’s $52bn purchase of BG Group, the oil and gas company. The biggest deal struck this year, the £21bn all-stock merger between the London Stock Exchange Group and Germany’s Deutsche Börse, does not hinge on the outcome of Thursday’s referendum.
However, shareholders are set to vote on it next month, and analysts believe a British exit from the EU would hurt the prospects of the combination winning approval.
“Brexit has had a real impact on M&A activity in the UK and also in Europe more broadly,” said a senior M&A adviser at one of Europe’s largest investment banks. “Nobody wants to do deals when they don’t know whether their target will be in or out of the world’s largest single market.”
The pace of big leveraged buyouts across Europe has also faltered this year, according to the Centre for Management Buyout Research, with private equity firms pointing to the EU vote as a chilling factor.
Appetite for M&A across Europe could be significantly affected if the UK chooses to leave, according to 1,421 deal professionals surveyed by Intralinks.
“In a Leave scenario, I think M&A in Europe is going to turn very negative,” said Wilhelm Schulz, head of Europe, Middle East and Africa M&A at Citigroup. European M&A, which is typically dependent on UK activity, is down 24 per cent from a year ago.
By contrast, a vote to remain in the EU could unleash a series of deals, according to bankers spoken to by the FT, as companies pursue ambitions they had put on hold ahead of the vote.
One senior Wall Street M&A banker, however, noted that the steep drop in sterling that is expected in the event of a Brexit might galvanise takeover activity involving British companies as multinationals take advantage of the cheapening of UK assets.