Callum Mitchell-Thomson, head of investment banking for Germany, Austria and Switzerland for J.P. Morgan, led the MuMAC audience through the expected consequences of Britain’s exit from the European Union (Brexit). Mr Mitchell-Thomson pointed out that whilst the immediate reactions to the vote were quite dramatic, within a week they had quieted substantially. Similarly, at first it appeared that the outlook for economic growth in 2017 for the European Union, the United States and, in particular, the United Kingdom itself would be worsened materially. Within three months of the referendum, however, the equity capital markets had recovered.
On average, cross-border M&A makes up 30 per cent of the overall M&A market. Within Europe, the United Kingdom historically has represented 30 per cent of cross-border M&A activities (Germany represents 14 per cent).
In recent years, however, Chinese companies have become increasingly active as cross-border acquirers in Europe, and the drivers of these Chinese acquisitions appear to be unaffected by Brexit. Chinese investors’ focus on diversified industrial companies will continue to lead them to mainland Europe, making the United Kingdom less relevant.
Further, according to Mr Mitchell-Thomson, the election of Donald Trump as US president will have a greater impact than Brexit on the global economy and the cross-border M&A market. For all these reasons, the future of cross-border M&A in Europe may be brighter than many originally thought.