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09th February 2017

Recent M & A Activity - The effect of Brexit

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In the two months leading up to the Brexit vote, there was a general slowdown in M&A activity, both locally and nationally, followed by a similar period in which businesses digested the impact.
However, with the sharp fall in sterling that followed, the Hewitsons Corporate team saw a noticeable increase in the number of transactions involving overseas buyers, keen to take what they saw as a clear buying opportunity. Price negotiations were perhaps less difficult than they might otherwise have been, in that any gap that had to be bridged between an overseas acquirer and target was more affordable in their local currency for the buyer and the proposition was financially more attractive overall.

Some local highlights of such transactions in which the Hewitsons Team were involved since September 2016 include:

  • The purchase of Oval Medical Technologies, based on the Cambridge Science Park, for US healthcare giant SMC Limited
  • The sale of GeoInformation Group to Verisk Analytics, a NASDAQ-listed corporation headquartered in New Jersey
  • The sale of Cambridge Online Systems to Columbus, listed in Denmark
  • The sale of an established engineering business to a trade buyer backed by a US private equity house
  • The partial sale of a local company in the field of lighting design and manufacture to a European buyer
As founder members of LawExchange, a network of carefully-selected law firms across the world, Hewitsons have been able to provide an extra level of guidance and insight to clients, wherever they are located. Our LawExchange colleagues also give us an insight as to how Britain is perceived overseas: Feedback indicates that, as a result of the focus on the UK and its economic performance (to date) against the dire predictions which had been issued, there has been an increased interest in the UK as a place where opportunities exist.

As well as transactions with an international dimension, the domestic market has been relatively unperturbed. Since 2008 UK businesses have acquired an ability to operate pretty successfully against a backdrop of unreliable economic predictions and market uncertainty. In the wider region, notable M&A and capital markets transactions which we have advised on include:

  • the MBO of Briggs & Forrester, a £200m turnover building services group
  • the sale by nationwide award-winning motor dealership Perrys of its Jaguar and Land Rover dealership
  • AIM company LiDCO Group plc on its private placing in December 2016 to raise £3.0m to accelerate growth in its US market
  • the sale of Spokemead Maintenance Limited to AIM company Bilby plc for a consideration of up to an aggregate £8.7m
  • the sale of Perkz, an employee benefits business with a unique online platform
  • AIM company Water Intelligence plc on its share capital reorganisation and US$31.49m capital reduction
  • AIM company Fitbug Holdings plc on its loan capitalisation, capital reorganisation, and placing and open offer to raise £2.6m
Looking forward to the rest of 2017, early signs of M&A activity lead us to be cautiously optimistic but there are certainly no clear trends yet as to likely M&A volumes.

With the triggering of Article 50 being imminent, uncertainty in the markets is inevitable as negotiations gather momentum. However, if sterling remains at historically low levels, overseas buyers and investors are likely to continue to see the UK as a place to shop for what they see as bargain investments. Furthermore, there are some pretty healthy sources for market volatility elsewhere in the world (political and economic), a point which is not lost on investors both in the UK and overseas.

As a result, we think that there are justifications for sellers to take a firmer stance in any price negotiations; and the Hewitsons Corporate Team has a depth of experience and expertise to help its clients in that process.

For further information on this subject contact James Lawence on 01223 461155 or click here to email James. For further information on our Mergers, Acquisitions and Disposals expertise, please click here.

A version of this article was originally published in Business Weekly on 09.02.2017, page 15.