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Brexit vote dampens dealmaking expectations, according to survey by CMS and Mergermarket

Dealmaking appetite in Europe has been overshadowed by the UK’s decision to leave the European Union, according to the fourth edition of the European M&A Outlook, published by CMS in association with Mergermarket.

The report canvassed the opinions of 230 Europe-based executives, from corporates and private equity firms, both before and after the UK’s referendum on 23 June. 
 
In the aftermath of the Brexit vote, 66% of respondents believed European M&A will be more muted over the next 12 months, compared to just 18% pre-referendum. Moreover, while only 23% of those surveyed before 23 June felt less positive about levels of European M&A activity than they did in the previous year, after the vote 90% said they were less positive about the European deal outlook.
 
Despite the volatility and uncertainty, there is room for cautious optimism. Stefan Brunnschweiler, Head of the Corporate/M&A Practice Group at CMS, comments: “Europe is still seen as a notable destination for deals, both cross-border and intra-regional; Europe is very much open for business and favourable valuations could potentially spur the market. And, once the dust has settled, it is those companies that are ready to invest that will be the winners.”
 
“Europe is still seen as a notable destination for deals, both cross-border and intra-regional. Europe is very much open for business, and favourable valuations could potentially spur the market. And, once the dust has settled, it is those companies that are ready to invest that will be the winners”, adds Stefan Brunnschweiler, Head of the Corporate/M&A Practice Group at CMS.
 
Indeed, Mergermarket data for the third quarter of 2016 shows only a mild slowdown in European M&A. In the first nine months of 2016 a total of 4,849 deals valued at EUR 476.3 bn were announced in Europe (a 3% and 12% decrease respectively) while CEE recorded 317 transactions valued at EUR 7.062 bn (a 5% decline in announced deals but a 61% decline in total value). 
 
Charles Currier, Head of Corporate at CMS in London, says: “The M&A trend data is very much in line with global M&A, which in deal value and volume resembles activity in 2013 rather than the soaring heights of 2014 and 2015. The UK still tops the table in terms of deal volume and value for Europe, despite the Brexit vote, and numerous other markets across Europe remain attractive prospects for inbound buyers”.
 
According to the M&A Outlook survey, almost 80% of respondents anticipate more cross-border M&A into Europe from non-European acquirers next year. Buyers from North America and Asia in particular will look to snap up assets to fuel overseas growth.
 
“We can expect to see confirmed interest from China’s state-owned and private companies in CEE assets as investment in new technologies and well-established brands is increasingly used as a tool to strengthen competitiveness and secure growth on the global market”, comments Helen Rodwell, Corporate partner, CMS CEE.