In the shorter term, there may well be a slow down or delay in M&A activity as parties, including funders, assess the impact of the Brexit vote and the uncertainty around the immediate future and the markets' reaction to that. The longer term outlook will depend on getting greater clarity on the ultimate Brexit terms (which may impact on some sectors more then other), investor confidence and market conditions, including the effect on Sterling which may create opportunities for overseas acquirers.
M&A deal implementation
Until the Brexit negotiations are concluded, the legal framework for M&A transactions will remain the same. The post Brexit framework will depend on the ultimate Brexit terms, but we outline our current expectations:
The overall legal framework is likely to remain broadly the same, both for domestic and cross border transactions. English contract law is often chosen to govern international M&A transactions and this is unlikely to change post Brexit as it is largely unaffected by EU regulation.
However, depending on the ultimate Brexit implementation terms, there may be changes to those detailed aspects which are directly impacted by EU regulation. For example:
- Merger clearances - proposed acquisitions which currently meet the EU Merger Regulation thresholds benefit from the EU's "one stop shop" clearance process, avoiding the need for clearances in multiple EU states. Post Brexit, both UK and EU notifications are likely to be required, with additional time and costs burdens
- Due diligence process - changes to the current EU regime on the use of personal data may impact on how employee and other due diligence is undertaken
- Employee protections - assets sales may be affected if the current protections afforded to employees on business sales are changed, although a wholesale repeal of these is unlikely, and
- Dispute resolution - with possible changes to the enforceability of English judgements in EU states, we may see a greater use of arbitration.
Except for merger clearances (see above), we would expect the regulation of public takeovers to remain largely unchanged, with no substantive changes to the UK Takeover Code.
Cross border mergers
There is currently an EU framework to facilitate cross-border mergers between UK companies and companies from other EEA states. This would not currently be available post Brexit if the UK becomes a non EEA state, but may be addressed in the Brexit negotiations.