Corporate raiders seek Brexit bargains in Britain

Overseas buyers lured by a plunge in the pound are looking to snare British companies on the cheap, ensuring a steady flow of deals since Britain voted to leave the European Union and defying expectations of an M&A drought.

Almost 60 transactions totalling $34.5 billion have been struck by foreign companies for British firms since 23 June, according to Thomson Reuters data, compared with 79 deals amounting to $4.3 billion in the month leading up to the vote.

This activity — dominated by Japanese group SoftBank’s $32 billion swoop for chip designer ARM Holdings — has defied warnings that dealmaking could dry up for a period if Britain backed Brexit, given uncertainty surrounding risks to the economy and access to the EU single market.

The list of British takeovers could grow after the summer, according to bankers who say they are working on possible bids on behalf of foreign companies interested in UK targets.

The SoftBank deal was hailed by the government as a sign of UK economic resilience, prompting new Prime Minister Theresa May to declare the country “open for business”. But M&A bankers said some of the post-vote takeovers had more to do with the relatively low valuations of British companies given current exchange rates, rather than being driven by confidence in the British economy.

Sterling has taken the brunt of market concern since the Brexit vote on 23 June, falling to a 31-year low in the aftermath of the vote.

“Clearly this is a buying opportunity,” said Ben Ward, head of UK corporate at law firm Herbert Smith Freehills. “People with strong currencies — dollar, renminbi, yen — will no doubt be interested in acquiring sound sterling-denominated assets.”

There have been dozens of other deals since the referendum.

South African retailer Steinhoff agreed to pay nearly £600 million for British-based discount chain Poundland on 13 July, for example.