Business development · 24 September 2018

US firms ignore Brexit fears and splash the cash on UK startups

The devaluation of sterling since the Brexit vote has made UK firms an attractive proposition

US companies are splashing the cash on UK businesses despite wider Brexit fears, new data has revealed.

According to new figures from accountants Moore Stephens the value of M&A (mergers and acquisitions) deals where US companies bought out UK firms more than doubled in the last year from £36.8b in 2016/17 to £79b in 2017/18.

This is in stark contrast to the value of UK takeovers by EU companies which fell by 5% to £13.3b over the same period.

Moore Stephens suggested the difference comes down to opposite views on Brexit. Whilst EU firms’ concerns over Brexit have been heightened by the political debate surrounding it, those in the US take a far less negative attitude.

The devaluation of sterling since the Brexit vote in 2016 has also made UK firms comparatively cheaper than many of their foreign rivals.

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The doubling of US investment into the UK has also come despite expectations that many US companies would reduce outward investment following recent tax reforms by President Trump. These new rules encourage firms to repatriate cash they hold overseas to the US as well as incentivising inward rather than outward investment.

Recent examples of investment and acquisitions include Coca-Cola’s planned purchase of Costa Coffee from parent Whitbread for £3.9bn, music app Shazam being snapped up by Apple for £299m and social business network Huddle acquired by private equity firm Turn/River Capital for £284m.

“Britain’s businesses continue to be some of the most attractive investment opportunities across the globe. It is a market too big to ignore,” said Damian Ryan, partner at Moore Stephens.

“Whilst Brexit has created uncertainty, the underlying strength of UK businesses means that they continue to be great investment opportunities for overseas investors. US investors are the ones taking advantage of this right now.”

“Britain is home to many of Europe’s most innovative and fast-growth businesses which will still be highly attractive to large multinational corporations after Brexit.”

“The decline in EU-led M&A deals is possibly understandable given their proximity to blanket Brexit media coverage and the potential complexity of future trade with Europe. However, there is a risk that they have missed out on excellent investment opportunities, particularly given the weakness in sterling.”

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