A practical response strategy

Capitalize: making the most of the Brexit opportunities

The UK has voted in a referendum to leave the European Union.

The UK has not left the EU, or even triggered any legal exit process. The process and timing of Brexit, and the shape of the UK’s future relationship with the EU, are yet to be decided. However, some changes are almost inevitable.

The outcome creates a number of uncertainties in the short, medium and longer term, and for many businesses is likely to increase risks and costs as a result both of that uncertainty and of change.

However, the Brexit process also creates potential opportunities. In this paper, we outline some of the areas of opportunity which businesses should explore.

Transactions

Brexit will create opportunities in the transactional market on several levels:

—	The process, which is likely to involve various twists and turns, will itself have an impact on valuations and risk profiles of assets.
—	We have already seen significant exchange rate movements, potentially making UK assets cheaper for overseas investors.
—	Uncertainty about the outcome or potential impacts of the Brexit outcome on UK based businesses (for example, the risk that they may be at a relative competitive disadvantage) is likely to create valuation opportunities for investors who are willing to accept or manage those risks. On the other hand, with the renewed interest in UK acquisition targets, now is a good time for potential targets to review and enhance their corporate takeover defenses.
—	By the same token, a shift of competitive advantage towards business located in EU countries, other than the UK, will create opportunities to acquire or invest in those businesses.
—	More creatively, as the new shape of regulation emerges this may bring restructuring opportunities to enable UK businesses to continue to enjoy Single Market benefits. Those opportunities may include benefits for UK businesses in acquiring Continental European assets to create new EU operations.

Practically, businesses planning a Brexit response strategy should reexamine their historic M&A priorities and should keep opportunities under constant review as the Brexit process unfolds. In addition, business should also examine current and planned deals to identify any areas which may need to be reassessed in light of Brexit.

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