×

Does Brexit mean more UK firms being strong-ARMed into M&A?

The U.K.'s vote to leave the European Union was seen by some Brexiteers as a chance to pick and choose on migration, reclaim the country's borders and draw up a new fortress UK as well as make a protest vote against the rise in inequality post the global financial crisis.

But on the investment markets, the drawbridge has already swiftly been lowered. Thanks to sterling's rapid fall, international billionaires and sophisticated companies have been given a rare opportunity to pick and chose which British assets to raid.

So far it is the Japanese, Chinese and South Africans that have proved the most opportunistic in a post Brexit world, but American buyers could cross the moat too.


Colin Hawkins | Stone | Getty Images

"I think there will be more opportunistic deals particularly from overseas buyers. We are getting messages from US buyers that they are interested," Karri Vuori, Head of M&A at Panmure Gordon, told CNBC last week.

Japanese multinational Softbank's $32 billion all-cash offer for ARM Holdings Monday marks the third offer for a big-name UK asset in the early days following the Brexit vote.

Many would consider ARM a prized asset because of its unique technology. Its long-lusted-after international property has become cheaper with a 30 per cent fall in the pound to the yen in the past year. Neil Campling of TMT Research said on Monday that the Softback offer came out of the left field and added that other suitors could be flushed out in coming weeks.

China's richest man, Wang Jianlin, also knows a bargain when he sees one and I'm not referring to his £80 million ($106 million) purchase last year of a 10-bedroom mansion in Kensington Palace Gardens.

The Chinese billionaire, well-versed on the UK landscape, was quick to set the mergers and acquisitions team to work at AMC Entertainment, owned by his Chinese conglomerate Dalian Wanda which swooped on Odeon and UCI Cinema Group last week, forking out £921 million.

AMC's chief executive, Adam Aron, admitted at the time that it was the cheaper currency that gave the group a window in on the British market and described the purchase as a once-in-a-generation opportunity to acquire Europe's leading cinema chain and that AMC was encouraged by sterling falling to a three-decade low to the dollar in the wake of the Brexit vote.

Strangely Brexit and the sale of Odeon and UCI Cinema Group has been a huge win for Justin King, the former boss of Sainsbury's and a strong "remain" supporter. King was charged with flogging the cinema asset at Terra Firma in his first major gig since departing the supermarket giant. Despite being an anti-Brexit voice, warning about a catastrophic impact on the consumer under Brexit, the result has been positive for King's personal fortunes and his reputation as a deal maker.

Highlighting the shifting sands, South African retailer Steinhoff faced stiff competition for UK assets earlier this year when it lost out to Sainsbury's for Home Retail and its prized asset Argos. But all good things come to those who wait. Steinhoff has been dealt better cards since June 23, to snap up discounter Poundland.

Uncertain times on the high street as consumer confidence slides post-Brexit vote, predictions of a recession and continued strong competition, all while Poundland struggles after buying rival 99p stores - made the board nervous enough to agree to an all cash offer of 222p a share, just 22p above Poundland's IPO price of 200p two years ago.

"I don't think there is going to be a counter bid for this," said Vuori.

He added that even while Steinhoff is paying a 40 per cent premium, it has a significant cushion with sterling down about 15 percent to the Rand since Steinhoff first circled Poundland before the vote to leave the EU.

The two opportunistic deals may signal the beginning of a raid by overseas buyers on UK assets, lining the pockets of seasoned buyers who are willing to punt in a time of uncertainty. Boards and deal-makers, mindful of the chance of at least a technical downturn and an outflow of capital from the UK, may be much quicker to engage and settle in a world with fewer buyers.

New UK Chancellor Philip Hammond is pleased assets here are still alluring. Perhaps another take on this is that the family silverware is now being sold on the cheap to wealthy overseas buyers. I don't recall this being highlighted by the Brexiteers.


Karen Tso is an anchor on Squawk Box Europe, CNBC and you can follow her on Twitter @cnbckaren.

Follow CNBC International on Twitter and Facebook.