Brexit and UK-related M&A

Whatever your M&A strategy, you want to understand and react properly to the post-referendum world. In this note, we look at some of the immediate legal issues and questions which arise following the EU Referendum result in relation to UK M&A - from public and private M&A to merger control, MACs, due diligence and restrictive covenants.

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The current state of play

It is important to remember that whilst the referendum result may provide a political mandate for a Brexit, its legal status is only advisory and not binding. In addition, it provides no guidance about the form which the UK’s future relationship with the EU and the rest of the world should take. The formal process for a Brexit would also not start unless and until the UK delivers a notice under Article 50 of the Treaty on European Union. This would trigger a two year transitional period for withdrawal arrangements to be agreed, at the end of which (absent an agreed extension to the process) the UK would automatically leave the EU. The difficulties inherent in agreeing the withdrawal arrangements in this time frame has already generated intense political discussion about when the UK should issue its Article 50 notice. Until it does so, a Brexit is not inevitable.

Assuming that an Article 50 notice is issued, the potential legal forms that a Brexit might take is covered in other Hogan Lovells bulletins. There are a range of possible alternatives, ranging from full European Economic Area (“EEA”) membership (likely accompanied by continued free movement of people and an EU-budget contribution) to the UK being unable to negotiate a trade agreement with the EU and falling back on its World Trade Organisation (“WTO”) membership and WTO default rules. It is clear that depending upon the model chosen, the outcome and related issues will be different.

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