More M&A to come
There is however, another way to see the ARM deal – from the point of view of the broader M&A cycle – and, it is here that the Brexit influence looks more interesting.
As Hawksmoor Investment Management’s head of research Jim Wood-Smith explained it: “We are in a low growth environment globally and, in such an environment, one of the ways to supplement insufficient organic growth is to buy it somewhere else. And, on a global scale, many UK assets are now at least 10% cheaper.”
Olivier Huet, co-manager of the Edmund de Rothschild UK Synergy fund, agrees saying that the European M&A cycle is probably around 18 months behind that of the US and there is no reason for that gap to be that large. In the UK specifically, Huet said the market has seen almost no M&A so far this year, largely as a result of the Brexit uncertainty, but he said, he does expect it to pick up, although he does not believe it will be a great year for M&A in the UK.
But, while he does not expect it to be going gangbusters, he added, “One of the few things people know with certainty is that in dollar and yen terms the UK market is down significantly. And, as long as UK companies have assets that aren’t dependent on the UK macro environment, there are likely to be deals.”
That of course is the final piece of the puzzle, in a case like that of ARM it is clear that it is largely unaffected by the UK consumer, but for many other companies and potential bidders the longer term impact of Brexit is more uncertain, but, of course, that is often where the most opportunity lies, especially when they are already at a discount.
