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UK M&A to drop sharply in 2017 as investors await Brexit clarity: Baker McKenzie

Mergers and acquisitions activity in the United Kingdom will drop sharply in 2017 due to uncertainty over the terms of its exit from the European Union, law firm Baker McKenzie said in a report published on Monday.

Britain avoided a collapse in mergers and acquisitions activity in 2016 as foreign companies used sterling's spectacular devaluation against the U.S. dollar to snap up British companies, Thomson Reuters data shows.

Baker McKenzie said that while M&A activity would have only a modest impact on European transactions if there was an amicable divorce, the lack of clarity over Brexit could hurt activity in the United Kingdom.

Merger M&A
Miguel S. Salmeron | Getty Images

"Given Brexit's impact on business confidence, we expect M&A values to fall by two-thirds in 2017 after numerous large deals in the first half of last year boosted 2016," Tim Gee, London M&A partner at Baker McKenzie said.

"Similarly, the potential for market volatility during the UK's exit from the EU is likely to impact the number of cross-border IPOs coming to market in London during 2017," Gee said.

Baker McKenzie and Oxford Economics said they forecast UK M&A values to fall to $125 billion in 2017 from the record $340 billion in 2016.

Prime Minister Theresa May has said she will trigger formal Brexit divorce talks with the EU by the end of March. She then has two years to negotiate an exit.

Baker McKenzie said it forecast global deal-making to drop slightly in 2017 but to rise in 2018.

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