In the opinion of many before the referendum, Brexit was the biggest risk to the financial services market since the banking crisis a decade ago. But for the mergers and acquisitions (M&A) market, in particular in the North West, this has not been the case.
In November 2016, Foresight Group, a fund manager with £2.1 billion assets under management, invested £3 million as part of a partial growth capital buy-out of Med Imaging Healthcare.
This is just one example of the increased amount of deal activity MC Vanguard has noticed over the last six months.
Grant Thornton, PwC, and Deloitte have also noticed similar trends in their markets.
With media coverage painting pictures of rainy clouds heading our way from Brussels, it’s perhaps surprising for some to see that life goes on in the Northern Powerhouse.
The region remains a key location for foreign businesses to expand in. In fact, the UK as a whole is the top European country for inbound M&A.
We’ve also noticed an increase in interest from overseas acquirers. Acquisitive companies in South Africa, Ireland, the USA and China have all expressed growing interest in a number of our clients.
This interest is partly due to the long needed devaluation of sterling, but also because, in this politically uncertain time, the UK remains remarkably stable.
The UK is the fastest growing economy in the Western world. Strong UK consumer confidence and instability in the Eurozone is arguably leading many overseas investors to consider UK equities a ‘safe haven’, much as Deutsche Bank predicted prior to the EU referendum in June 2016.
Meanwhile, the regional private equity and venture capital market is experiencing significant growth. Foresight opened a Manchester office in 2016 to manage its £40 million Regional Investment Fund. Additionally, multiple fund managers will also commence management of the new Northern Powerhouse Investment Fund very shortly – which will provide further growth capital for regional SMEs.
Equally, the Merseyside Special Investment Fund (‘MSIF’), one of the more established regional venture capital funds, is particularly active in providing access to finance for SMEs across the wider Merseyside area.
Foreign capital is also flowing into the North West.
Ardenton Capital, a Canadian private equity firm, recently opened its first office outside of North America. Waterland, a Dutch private equity firm, also announced the opening its first office outside of mainland Europe.
The Chinese have also seemingly bought into the merits of the Northern Powerhouse. While Chinese investors are heavily involved in residential and infrastructure projects across the North, such as the £800 million Manchester Airport City scheme, we’ve also seen a notable increase in Chinese investor appetite for UK SMEs and other UK assets, particularly in Manchester and Liverpool.
In fact, many parts of the world view Brexit predominately as a positive event. Across other G20 nations not in the EU or Commonwealth, 35% of 18 – 34 year olds hold a positive view on Brexit while only 17% a negative view. The fundamental strengths of ‘brand UK’ and the UK economy remain.
So, what will be the impact of Brexit on the North West M&A market? Increased interest from China, North America and the Commonwealth? Further inflows of foreign capital? Come to your own opinion but it’s certainly looking rather bright at the moment.
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