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Brexit: Comment from Duff & Phelps on M&A
M&A
“The European mid-market has historically been resilient to economic changes and macro factors – we expect this to again be the case following Brexit. With this decision comes opportunities and challenges around processes, valuations, disposals and acquisitions, growth prospects, debt and equity funding and cross border transactions”. Henry Wells, Managing Director.
Financing
“The process of finding the right financing solutions may become more difficult following an exit vote, so working with a debt advisor with significant transaction experience and close relationships with banks and alternative lenders, will be important. Similarly, this vote result may create problems with existing financing arrangements, e.g. weaker trading performance leading to covenant issues, so a negotiation with existing lender(s) or exploration of refinancing options will be a worthwhile exercise. However, if a vote to exit is seen as an opportunity to make more commercially astute acquisitions, then raising flexible financing quickly can be considered.” Ken Goldsbrough, Managing Director.
Valuation
“The market needs to be conscious that in some cases, deals with prices that have been pre-agreed may be subject to renegotiation. In addition, deals involving companies that have given working capital commitments at handover stage may be subject to disputes due to a change to the fair value of assets and liabilities. Also, the values of options and derivatives held on corporate balance sheets will need to be revalued and agreements with HMRC for valuations to be set for a period for further issue of shares or following post-transaction valuation checks may be withdrawn.” Michael Weaver, Managing Director.
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