Whatever your point of view, there is no doubting that the recent Leave result has caused a level of uncertainty in the economy, with a direct impact on currency and share markets.
Some companies may see this as a huge opportunity, particularly those who are purely exporting, but for many others with cross border trading for both purchases and sales, investment projects, customers with overseas connections, this will be a time to test contingency plans.
In recent years, deal volumes and investment by companies has increased, and we have seen a particular increase in cross border transactions. Many of the cross border transactions were to provide the acquirer with access into the European Single Market.
For the time being, the UK is still in the EU, including enjoying the benefits of the single market and having to abide by the laws, as we did before the referendum. However, with the uncertainty over the UK’s economy and the role within the EU, we expect a temporary reduction in volume and amount of investment during this period of adjustment.
In our short experience since the result, we have seen additional challenges faced by companies with a European dimension in raising finance and some review of the anticipated benefits of some projects. However, we have also seen a number of transactions continue without drawing breath.
It is in the nature of running a business and undertaking transactions, of any size, that there will be bumps and unexpected events along the way. It is a good time to review the business strategy, consider the ways in which any risk can be mitigated and options for the different outcomes.
Specifically in Corporate Finance, it is worth reviewing any investment project or transaction to consider the potential impact of the uncertainty and an ultimate Brexit, review the benefits and the funding or valuation structure. This may include revisiting the due diligence process.
Much will depend on how the post referendum process, whatever the outcome, is managed and the return of certainty to the economy, including visibility over what the relationship with the EU might look like. We feel that the resilience and flexibility of the economy, particularly the SME market, is strong enough to weather the current turbulence.
If you wish to discuss strategy in the wake of Brexit or review your exit or acquisition plans, please contact Hannah Farmborough or call on 0207 429 4147 to be put in touch with one of the members of our Corporate Finance team.
This article originally appeared on the blog of our member firm, Broomfield & Alexander.