Brexit came and went, and the buildup was bordering on manic in all aspects of the media; so what was the fuss really all about and how have things really changed? The buildup saw both sides of the debate positioning, counter-positioning and laying out the scare mongering statements and tactics to grab the vote. The UK was awash with the countless possibilities if they stayed or left. So what were the people thinking?
It’s fair to say that there were some very high profile political careers on the line, and you could see where they had put their war chests to work. This included everything from the UK economy being undermined, through to the EU crumbling with other member states threatening to move away should the UK choose to walk away. So, after 43 years of relative stability, was there to be a major surprise and demonstration of national pride coming to the fore?
The polls showed that right up to the vote closing, “staying in” was where the smart money was going. Cameron had campaigned hard on “negotiating from within” being the best tactic and was key to the stability of the EU, and underpinning that was his belief that isolation simply would put the UK in difficult trading situations. Most people had little knowledge of Article 50, which could be invoked within 6 months of the vote. This would be followed by a period of 2 years before the separation could actually happen; so in reality, irrespective of the result, nothing material would change for the next few years.
In the end, the vote surprised most Brits with the country waking up to find that, in fact, they were now just “British” as opposed to Europeans. But what about the initial reaction and the fallout? When the dust settled, what we first saw was the Pound versus the Dollar and Euro weakening. That, in fact, has always been the trend, and this time 27% against the dollar was surely a sign that the Brits had gotten this wrong. Next, the Capital markets did slow and caution was the feeling that prevailed. IPOs were definitely affected, with the number of filed IPOs stalling, meaning that there would be a knock on effect on M&A activity.
Some two months on, the short term effects are now evident. The Pound devaluing against the Dollar had a profound impact on M&A activity. Suddenly, UK companies were seen as good acquisition targets, as they were great value for money for US buyers. In fact, the number of transactions closed were on the rise and no one missed a beat. EU investment in startup companies generally fell but grew in the UK. The Capital markets have remained strong with record cash on the balance sheets for use in major investment in growth strategies, both organic and acquisitive.
So what was all the fuss about? In reality, nothing happened in the short term. Politicians jockeying for position and hoping that they had chosen wisely on who and what to back. We saw some high profile scalps, including Cameron. Also surprising was Boris Johnson choosing to step aside from going for the PM’s job and ultimately gaining a Cabinet job. Lots of posturing from Germany and Merkel refusing to jump in and prop up Deutsche Bank. Signs of discord within the remaining member states were only marginally evident.
In the final analysis, nothing has really changed and probably won’t for the foreseeable future. The evidence is actually supporting a strong M&A market with traditional and new buyers active. Over the next 5-10 years we will truly find out the net result of Brexit - that’s if the UK actually ends up leaving.