A cheaper pound means that British companies for sale will cost less after Brexit. In fact, the aftermath of the Brexit vote appears to be dominating the financial and market news worldwide lately – and little wonder. It is likely the most important event relating to world business for many decades. Whether in the USA, China or Europe, Brexit is of extreme importance and its effects will have a genuinely global impact. So what’s next? Snaffling UK companies on the cheap, that’s what!
Since the British public voted to leave the European Union, there have been claims of doom and destruction of the UK economy. Since the Brexit vote on June 23, there have been around 60 deals struck by foreign companies to purchase British companies. The total value of these purchases has been more than $34.5 billion. During the month prior to the vote, there were 79 deals according to Thomson Reuters – and these amounted to a total of $4.3 billion.
Why? Nobody can answer that other then the buyers and sellers, but it does not take a genius to see that the buyers saw an opportunity for profit and sellers believed that their companies would lose value with the Brexit vote to leave the EU. This is the biggest event almost since politics began, so little wonder it is all over the news and people are seeking to make money from it.
Now that things are settling down a bit, the Apocalypse has not taken place and Britain is still a powerful member on NATO, the UN and currently still trades freely with EU and elsewhere in the world. In fact, since the Brexit vote, the British Commonwealth countries are coming back to Britain with good trade deal offers. Australia is one, requesting a free trade deal with the UK.
However – back to the deals between UK companies and foreign buyers and investors. The Japanese company SoftBank’s recent purchase of ARM Holdings was the highlighted deal that showed to the world that such deals with UK companies would not suddenly dry up after Brexit. Life finds a way, and life after Brexit is very much as you were – but with some businesses up for grabs. Some want to be while others need a little financial persuasion!
Does this really have anything to do with Brexit? Perhaps not directly, but is certainly seems to have a lot to do with the reduction in the value of sterling. A year ago long ago a UK pound was worth $1.56 dollars – today it is worth $1.31. A 16% drop in value. This is a 31-year low for sterling and the time is ripe for foreign acquisitions that have been on the boil for a while.
These purchases are not driven by confidence in the UK economy, but for other financial reasons. A $4 million takeover last year is a $3.36 million takeover today. A massive savings – which is why many purchases that may have too expensive last year are affordable today! This has led to some significant purchases:
Steinhoff, the South African retailer, paid £600 million for UK discount chain Poundland this month. This time last year it would have £715 million, just on exchange rate alone. AMC Entertainment Holding’s stated it would purchase Odeon & UCI Cinemas Group in London for £921 million. A year ago that would have been £1.1 billion. On the sports front, Wolves (Wolverhampton Wanderers F.C.) was purchased by Chinese company Fosun International. There are many more, and now is the time for American businesses to buy up willing UK companies – or even soccer teams!
Not all Brotish companies for sale can avoid it. Some hostile bids cannot be avoided because shareholders agree to them. For cash-rich foreign buyers, the UK has become a massive shopping mall! U.S., Asian and African conglomerates are taking the opportunity to make purchases at prices they have never dreamed of for decades. Deals that have been previously aborted for price issues are now becoming resurrected.
The doomsters were predicting an M&A drought, but that has not materialized – on the contrary! Maybe this is indicative of the way that Brexit is proceeding. The UK is prepared to enter discussions with the EU rather than simply pull out. Many believe that a form of diluted ‘membership’ may ultimately be agreed, where the UK is able to participate in the free European market without the requirement of allowing unlimited immigration from EU countries.
Armageddon has not materialized; even if British companies for sale go to overseas firms the UK is still open for business. If you have you eyes on a business you would like to own, then the currency exchange rate will benefit you. However, it does not take long for people to understand what is happening, and it won’t be long before sellers see this and up their prices accordingly!
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