Market reaction 

Ever since the Brexit referendum vote in June 2016, through to the actual separation of the UK from the rest of the EU on the first of this year, M&A activity in the UK and throughout Europe has continued without marked disruption. A few UK transactions were stalled and even cancelled altogether in the immediate aftermath of the vote and the consequent 20% decline in the UK currency. The heated Article 50 withdrawal negotiations, and the prolonged polemics and media commentary through which they were observed, created further market uncertainty which affected some prominent transactions, including the withdrawal from a GBP 2.9 billion takeover of Intu Properties by a bidding consortium comprising Peel Group, the Olayan Group, and Brookfield Property Group in 2018 due to “uncertainty around macroeconomic conditions.” Generally, however, UK M&A activity has prospered despite a backdrop of four years of political and regulatory uncertainty. Now that uncertainty has been removed, there are some good reasons for the M&A market to remain even more robust going forward. 

The weaker currency has created opportunities in the UK for overseas buyers, and we have certainly seen an increased number of foreign purchasers for UK assets, notably Comcast’s GBP 37 billion takeover of Sky plc (2018), US-based Advent’s GBP 4.1 billion acquisition of Cobham plc (2020), and Hong Kong’s CK Asset Holdings purchase of Greene King for GBP 2.7 billion (2019). The pound has recovered since the signing of the EU-UK Trade and Cooperation Agreement (TCA) on December 30, 2020 and is now trading at less than 10% below its pre-referendum level. Together with lessening economic and political instability, that trend may provide increased opportunities in the EU for UK-based acquirors, particularly private equity funds. 

The weeks immediately following the Trade and Cooperation Agreement have seen some initial practical, logistical, and other teething problems arising from the fact that the TCA was only finally agreed within a few days of the December 31st deadline for the UK withdrawal. Politicians and their diplomatic appointees in both the US and Europe are well accustomed to last minute deals, but such diplomacy can cause difficulty for commerce and business to respond to the changing regulations. The confusion has disrupted crossborder freight transport and certificate of origin documentation for trading in goods and particularly in animal products. EU-UK e-commerce traffic has been disrupted by the complexities of adopting new VAT procedures. Some of these procedural and logistical issues will be resolved by businesses and regulators working together in good faith under the direction of 15 specialized Trade Partnership committees, as prescribed by the TCA, but certain sectors are likely to see a re-balancing of local businesses versus crossborder exports into and out of the UK. 

Brexit has generated opportunities for UK businesses to acquire an EU presence as a result of the UK withdrawal from the single market, and will continue to do so. We have already seen increased investment by UK businesses in EU-based operations in regulated services sectors such as funds management, insurance, fintech, and wealth management, where UK business owners have established subsidiary operations in EU jurisdictions. France’s Europe Minister has highlighted up to 20 banks and institutions that have established Paris operations since 2016 in order to regain passporting of banking services to customers in other EU countries. We can expect UK and US business owners in those sectors to increase their appetite for acquisitions of business operations already servicing those sectors. Other sectors trading finished goods, such as e-commerce retailing, can be expected to increase their direct investments in warehousing and distribution within the EU internal market, and to be motivated to respond quickly by acquiring existing businesses with established logistics infrastructure and retailing systems. 

The UK internal market remains the largest non-EU market for EU exporters. EU businesses currently supplying their UK customers are required to adapt their supply chains for the post-Brexit trading environment and VAT procedures. Multinationals operating in manufacturing industry sectors with established complex and regulated export supply chains such as automotive, electrical goods, white goods, and so on, will be able to adapt readily to these challenges. For many medium-size businesses in the EU it will be advantageous to acquire businesses already operating within the separate jurisdiction of the UK single market. 

M&A law and operations 

Private and public company M&A activity is largely governed by English contract law. This is likely to remain the case after Brexit. English law has long been the preferred choice of jurisdiction for shipping and aviation, banking, and other international transactions. Some international companies may seek to have transactions governed by other legal jurisdictions as a result of the reduced influence of the UK within the EU, but the day-to-day process of buying and selling a company is likely to remain largely unaffected by the withdrawal of the UK from the EU and the oversight of the European Court. 

Brexit will have a greater legal impact in other areas of corporate life and the underlying legal issues. These include laws governing intellectual property, data protection, employment, and commercial contracts. Changes to the regime governing customs procedures and product and health regulations and their effect on supply chains will have a greater impact on the day-to-day operations of EU and UK businesses. Areas such as merger control and personal data have become heavily reliant on EU regulatory standards; legal and operational changes to such standards could have a knock-on effect on M&A legal and due diligence processes. 

Public takeovers 

The regime governing public takeovers is likely to remain largely unaffected by Brexit, despite the trans-European dimension. The City of London is a key financial center for public markets and investment institutions, and the regime regulating public company takeovers is unlikely to change in an immediate post-Brexit world. The precise details for the equivalence regime in the UK are currently being negotiated by the regulators concerned but are expected to enable a competitive environment for financial services without driving capital and markets away from UK and Europe to North America and Asia. 

An increasing trend for publicly listed companies is to consider divesting subsidiaries or divisions into private ownership, or in some cases, for the entire company to be taken private. This may in part be a consequence of the indirect regulatory and market impacts of Brexit on those parts of a company which are most affected by such challenges, which in turn may lead to value opportunities for acquirors, both strategic buyers and private equity. 

Crossborder transactions 

There is no overarching framework in the EU that governs international mergers and acquisitions and each transaction is governed by the country jurisdiction in which the parties have chosen to base the deal. The impact of Brexit will remain largely immaterial to crossborder transactions and how these are structured. 



Looking beyond Europe, the TCA enables the UK to develop trade and investment policies and relationships as an independent member of the WTO. Businesses in North and South America and from the Asia Pacific region, for example, can expect an opening of markets and increase in M&A activity into and out of the UK, reflecting a more open and liberal stance towards trade and investment. 

There have been recent press reports that the EU may, as a direct result of Brexit, be minded to add British Overseas Territories, including the Channel Islands and the British Virgin Islands, to its tax haven blacklist – whereas previously these territories, a feature in many corporate acquisition structures, had protection by virtue of the UK’s membership of the EU. This could, if the remaining 27 member states so decide, have a material impact on the tax structuring of M&A transactions.

As the Trade and Cooperation Agreement settles down and the vaccination programs roll out during 2021 (other global circumstances notwithstanding) there is likely to be less political and market uncertainty, which should allow greater confidence to enable M&A activity to flourish both in the UK and the EU.