Member Article

North West’s M&A Market – Impact from Brexit?

Brexit is now a phrase at home in the Oxford English Dictionary, the media’s favourite buzzword and in the opinion of many pre-referendum, the biggest risk to the financial services market since the banking crisis a decade ago.

So, what does Brexit mean for the North West’s M&A market?

In November 2016, Foresight Group, a fund manager with £2.1 billion assets under management, invested £3 million as part of a partial growth capital buy-out of our client, Med Imaging Healthcare.

This is just one example of the accelerated amount of deal activity MC Vanguard (the Corporate Finance arm of Mitchell Charlesworth LLP, a regional accountancy practice with five offices across the North West) have noticed over the last 6 months across the North West. Apparently, Grant Thornton, PwC, and Deloitte have also noticed similar trends in their markets.

With media coverage painting pictures of rainy clouds heading our way from Brussels, it’s perhaps surprising for some to see that, life goes on in the North West; the Northern Powerhouse, as the phrase goes. The region remains a key location for foreign businesses to expand in, indeed the UK as a whole is the top European country for inbound M&A.

We’ve also noticed an increase in interest from overseas acquirers. Acquisitive companies in South Africa, Ireland, the USA and China have all expressed growing interest in a number of our clients. This interest is partly due to the long needed devaluation of sterling, but also because, in this politically uncertain time, the UK remains remarkably stable.

The UK is the fastest growing economy in the Western world, additionally strong UK consumer confidence and instability in the Eurozone is arguably leading many overseas investors to consider UK equities a ’‘safe haven’’, much as Deutsche Bank predicted prior to the EU referendum in June 2016.

Meanwhile, the regional private equity and venture capital market is experiencing significant growth; Foresight opened a Manchester office in 2016 to manage their £40 million Regional Investment Fund. Additionally, multiple fund managers (announced 22nd February 2017) will also commence management of the new Northern Powerhouse Investment Fund very shortly – which will provide further growth capital for regional SMEs. Equally, the Merseyside Special Investment Fund (’‘MSIF’’), one of the more established regional venture capital funds, are particularly active in providing access to finance for SMEs across the wider Merseyside area.

Foreign capital is also flowing into the North West. Ardenton Capital, a Canadian private equity firm, recently opened its first office outside of North America. Secondly, Waterland, a Dutch private equity firm just announced the opening its first office outside of mainland Europe. Naturally, both of these offices are in Manchester, specifically to target long term investment in the UK regional middle market.

Unless you’ve been living under a rock, you’ll have noticed the Trump administration has made its intent for strong UK-US relations quite clear; leading one American Trade Lawyer, Frank Samolis, co-chair of international trade at law firm Squire Patton Boggs, to state he believes the Northern Powerhouse could help the UK become ’‘Singapore on steroids’’.

It’s not just the North Americans; the Chinese have seemingly bought into the merits of the Northern Powerhouse. While Chinese investors are heavily involved in residential and infrastructure projects across the North, such as the £800 million Manchester Airport City scheme, my colleague Nan Zheng, has seen an notable increase in Chinese investor appetite for UK SMEs and other UK assets, particularly in Manchester and Liverpool.

In fact, many parts of the world, notably the Anglosphere and the Commonwealth, view Brexit predominately as a positive event. Across other G20 nations (not in the EU or Commonwealth), 35% of 18 – 34 year olds hold a positive view on Brexit while only 17% a negative view. The fundamental strengths of ’‘brand UK’’ and the UK economy remain.

So, what will be the impact of Brexit on the North West M&A market? Increased interest from China, North America and the Commonwealth? Further inflows of foreign capital?

Come to your own opinion but it’s certainly looking rather bright at the moment.

Author: James Curtis, Corporate Finance Executive (Manchester based).

MC Vanguard Corporate Finance, part of Mitchell Charlesworth LLP.

james.curtis@mcvanguard.co.uk +44 (0) 161 817 6100

The views stated in this article are my own and do not necessarily represent those of MC Vanguard or Mitchell Charlesworth LLP.

This was posted in Bdaily's Members' News section by James Curtis .