U.S.-U.K. Tech Deals Hold Steady Despite Brexit, Deloitte Saysby
There is some good news for U.S. dealmakers and their counterparts across the pond, despite a drop in mergers and acquisitions volumes worldwide.
Technology, media and telecommunications transactions remain resilient, driving both volume and value in deals between U.K. and U.S. companies, according to a report from Deloitte LLP. That’s despite the uncertainty surrounding the U.K. vote last month to leave the European Union, which could wipe as much as $1.6 trillion from future mergers and acquisitions, according to a separate study.
The Deloitte report focuses on M&A activity between the U.S. and the U.K. in the first half of 2016.
“TMT businesses are likely to be more ‘Brexit resistant’ than others,” Richard Parsons, head of Deloitte’s U.K. private equity coverage, said in the report.
Resilience in the technology industry is supported by mid-size deals, the report said, such as Playtech Plc’s $153 million bid for Best Gaming Technology GmbH and Cypress Semiconductor Corp.’s $550 million acquisition of Broadcom Ltd. assets.
Deloitte expects the tech industry to support cross-border deal making between the countries throughout the year. Innovation in the U.S. tech industry should support U.K. outbound deals, while the relative strength of the dollar against the pound will increase the U.S. appetite for U.K. targets.
Transactions between the two countries announced post-Brexit vote include British turnaround specialist Melrose Industries Plc’s $2.81 billion takeover of U.S. ventilation company Nortek Inc., and MasterCard Inc.’s $920 million proposal to buy Britain’s VocaLink.
U.K. tech companies are particularly well-positioned to be acquired by U.S. competitors, said Paul Staples, a partner at Deloitte for U.K. advisory corporate finance.
“There are hundreds of tech companies worth $100 million or less in the U.S. and in the U.K.,” Staples said in the report. “While the U.S. owners tend to hold equity until they are late in life, in the U.K., owners sell much earlier.”
Despite the optimism, Brexit is still looming over dealmakers. While there are U.S.-U.K. cross-border deals on the table, Jason Richards, a partner at Deloitte focused on U.K. transactions, said that “some deals are taking a breather” amid uncertainty in the wake of the Brexit vote.