Strong Dollar Makes UK Businesses Vulnerable to Takeovers

A leader in London’s finance world has publicly expressed concern that British companies are vulnerable to being taken over by foreign entities taking advantage of both a weak British pound and general weakness in equity markets.

Ross Mitchinson, co-chief executive of British brokerage and investment bank Numis, told the Financial Times that British businesses are being targeted for acquisition, the paper reported Friday (Sept. 30).

“M&A is being driven by U.K. companies being bid for by overseas companies getting the double benefit of weakened sterling and lowly valued equity markets,” Mitchinson said, per the report.

He also noted that private equity funds are using more equity than usual to finance deals because borrowing is currently difficult. However, he added that investors will replace their equity with debt once lending eases.

“They can refinance these deals with debt when the market reopens,” he continued. “Sadly, the U.K. is having more companies leave the market than join.”

Numis also stated that corporate advisory fees in 2022 would likely be about a third of 2021’s figures because of a dramatic falloff in the number of initial public offerings (IPOs), according to the report. Mitchinson said he’s not expecting that IPO market to reopen soon, but noted that “history tells us that there can be a strong bounceback when it does.”

Additionally, mergers and acquisitions lopped the equivalent of $45.7 billion in value off of the U.K. stocks this year, per the report, while IPOs added only a small fraction of that.

See also: Businesses Abandon Mainland Europe to Focus on Post-Brexit Britain

Last month, PYMNTS reported that Brexit contributed to a number of businesses choosing to focus on the United Kingdom rather than Europe, due to differences in regulation, among other factors.