The General Election could lead to a UK M&A boom


Theresa May and Jeremy Corbyn
In
previous years, M&A activity has shot up in the 90 days
following an election.

Getty

 

As Thursday's General Election approaches, businesses looking
for mergers and acquisitions (M&A) may be readying to take
advantage of the environment this affords.

In previous years, Thomson Reuters data reveals, M&A has shot
up in the 90 days following an election compared with the
preceding 90 days.

Deals which involved the purchase of a UK company rose by four
per cent in 2015 and eight per cent in 2010 following the
elections, while deals where UK buyers hunted outside their
homeland have increased following the last three elections.

After the 2005 election there was a jump of 23 per cent in the
number of outbound deals compared with the period before the
public voted, which escalated to 25 per cent in 2010 and 47 per
cent in 2015.

The positive impact of elections on M&A is not just the case
where a Conservative government has taken the reins, the data
indicates.


Canary WharfBusiness Insider/Will Martin

Activity showed a rise in both 1997, when John Major lost out to
Tony Blair's Labour party, and in 2010 when the
Conservative-Liberal Democrat coalition took over.

Thomson Reuters' data has also painted a positive picture of the
UK M&A scene so far following the Brexit vote.

UK involvement in M&A transactions in the period following
the referendum has reached its second highest level in nine
years, compared to the same period in prior years.

But accountancy firm RSM notes that there are some negatives
hidden in this. M&A between UK businesses plummeted by almost
50 per cent in the first quarter of the year compared to the same
period in 2016, while interest from foreign buyers also
decreased.

The domestic slowdown "may reflect a sense of unease about the
future of the UK economy and the uncertainty resulting from
Brexit", said RSM's head of corporate finance Rob Donaldson, who
added that "despite the fall in the pound, which has led to some
high-profile attempts by foreign companies to snap up UK firms,
domestic and overseas buyers are proceeding with caution".

Yet UK businesses seem to be spending freely, according to
Thomson Reuters, as announced M&A with any UK involvement has
totalled $163.5bn so far in 2017 – more than double the $80.2bn
announced at the same time last year.

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