In June the UK voted to leave the EU, with far-reaching implications for the nation. But what will this mean for corporate financiers? What will it mean for private equity, early-stage investing or M&A? And how will debt and equity capital markets adapt? We asked several senior members of the Corporate Finance Faculty for their views.
It’s a bit of a cliché, but it is still early days. Until we know how the various trade negotiations with both EU and non-EU states are going to pan out, then second-guessing the full impact on private equity houses, and indeed on their portfolios, is nigh on impossible. PE houses are specialists in finding and maximising opportunities, and managing risk.
What the EU referendum result has done is given them plenty of scope to display their talents. In the UK mid-market sphere, a number of funds have geographicallydefined investment parameters, so are restricted to investing in the UK. There’s an awful lot of dry powder still to be put to work, and while there may be short-term uncertainty, funds won’t be prepared to sit tight indefinitely.
However, there will be some keen to grow their footprint more broadly across the EU and beyond. If the prevailing view is that Brexit means UK firms can be more nimble on the global stage, then you could well see more deals – both inbound and outbound. But if it transpires that cutting trade deals is more complicated than we currently imagine, and that broader economic confidence has been knocked, then we could see the pipeline of transactions coming under pressure.
Fundamentally, however, the UK has a number of in-built advantages that will enable it to continue to be a major player on the European private equity stage. Culturally it has long been open for doing transactions and has an entrepreneurial drive for creating exciting businesses. There’s a lot of transparency, and of course English still remains the main language of business. If we can get Brexit to work to our advantage and ensure that British businesses continue to flourish, then PE will naturally want to remain a part of that.
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