M&A activity hit hard by Brexit vote but biggest deals see increase in value

● University research finds deals are down by 15% since EU referendum

The Brexit vote has triggered a significant drop in mergers and acquisitions (M&A) activity in the UK, according to new academic figures published today.

Researchers have found that, almost a year on from the vote, deal activity has fallen by 15 per cent, or a drop of around 60 mergers a month from the 430 average seen in the run up toit.

Since then M&A activity has failed to recover to its pre-referendum level according to the research carried out by the University of East Anglia (UEA).

However, the referendum did not affect all takeover deals in the same way. The lowest value among the largest 10 per cent of M&A activity actually rose from $214 million (£165m) to $250m.

In contrast, the overall value of the smallest 25 per cent of M&A deals has fallen in relative terms, from $5.7m before the Brexit vote to $4.5m postreferendum, down 21 per cent.

Dr Peter Ormosi, a senior lecturer in competition economics at UEA, said the figures were “bad news” for businesses and consumers.

“While it is widely recognised that last year’s EU referendum caused significant uncertainty for markets, some early indications were that it had not reduced the level of business confidence,” he said.

“However, we find that the referendum has in fact led to a significant drop in merger numbers. This is bad news. The vast majority of mergers, unless they have a significant adverse effect on competition, have the potential to contribute to social welfare, for example by reducing transaction costs, or by enhancing the efficiency of the merging businesses.

“If competition is left undisturbed, these benefits are passed on to consumers in the form of lower prices. When there is a setback in M&A activity, it means that some of these potential benefits are foregone.”

Ormosi added that the finding that the largest businesses have become more “M&A active” since the referendum was a “worrying sign”. He added: “It might be to do with the largest firms being cushioned from the increased uncertainty of Brexit, perhaps as a result of being better able to exert influence over politicians.

“Transitional periods are never good for businesses and consumers.

“But what makes it even worse is that businesses do not seem to be equally exposed to the same risk from the increased policy uncertainty, and those that are more likely to have political influence seem more protected from these risks.”