Region’s deals market shrinks significantly as Brexit uncertainty bites

Mergers and acquisitions were down significantly in the first half of 2018, compared with the same p

Mergers and acquisitions were down significantly in the first half of 2018, compared with the same period last year, according to a new report. Picture: Getty Images/iStockphoto - Credit: Getty Images/iStockphoto

The East of England's deals market has taken a massive blow in the first half of the year.

The Experian MarketIQ M&A review shows 249 mergers and acquisitions and ECM (equity capital markets) deals were announced in the region in the first half of 2018 – almost a quarter (23%) lower than the number recorded for the same period last year.

Meanwhile the value of transactions fell by 75%, to £3.5bn from £14.1bn last year.

And financial experts in the region believe current uncertainties around Brexit are almost certainly playing a part.

The region's small deals market was hit the hardest, with deal numbers dropping 37% to 47 in the period compared with last year and the value falling 44% to £143m.

The value of large transactions fell by 50% to £2.6bn, despite the volume of deals only dropping from nine to seven.

Paul Pearce, investment director at Hargreave Hale in Norwich, suspected firms were holding back on investment decisions as the Brexit negotiations lurch along.

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'It has reflected the slowdown we have had in business investment generally over the past six months which is primarily due to the uncertainty around the Brexit negotiations,' he said.

'It is a case of companies keeping their powder dry in a more unknown business environment than they have had for a good number of years.'

He added that 'loose' monetary policy over the last few years had caused an upsurge in the deals market – so the lower volumes and values now being seen could just be a 'normalisation'.

Alex Kenworthy, principle associate at Mills and Reeve's Norwich office, said that while the firm had been busy – it was the region's most active legal adviser in the first half of the year – deals had been taking longer to sign off.

'The climate is causing businesses to think harder about whether now is the right time to invest heavily,' he said.

'It is telling that most of the deals we have done in the past 18 months have been for overseas buyers. That is probably due to the value of the pound as they get more for their money.

'I get the sense that UK businesses, although they have the financial resources, are more nervous about taking the jump as they do not know what the next 12 to 18 months will bring. I do not think we can pretend that is not going to have an effect.'