Partner, Moore Stephens

M&A points to consider before executing a U.K. inward investment strategyM&A points to consider before executing a U.K. inward investment strategy

Investing in the UK, an acknowledged world-leading business destination, is a strategic objective for a number of global companies and international investors. But what should you consider before you take those steps?

  1. Have a pragmatic strategy beyond Brexit

In January 2017, UK PM Theresa May set out her 12 point plan for negotiating the UK’s exit from the EU. A good entry strategy should be Brexit agnostic and therefore plan beyond it in order to effectively navigate the uncertainties likely to arise as Brexit is expected to be formally triggered in 2017.

  1. Structure of the transaction

Consideration should be given to the type and form of entry strategy. Identifying the right acquisition candidate is important and involves market mapping, exploring the universe of candidates and assessing whether the target is the right fit and the most appropriate way to engage with them.

Undertaking an acquisition in the current political change facing the UK and other G7 countries in 2017, a strategy that is flexible with optionality built in may well benefit all.

  1. Do you have the right professional advisers

It is important that you have the right professional advisers who understand the UK, share your values, know your story, and have the right skills to service you in this vibrant economy beyond the completion of an acquisition.

The right advisers will help you gain insight into and navigate the regulatory framework, act on your behalf during negotiations, provide access to their proprietary database of potential acquisition targets thereby avoiding corporate auctions, help engage with and project manage other advisers that may need to be involved, provide valuable sector expertise as well as conduct a tailored due diligence exercise.

  1. Is your bank global

It may also be worthwhile assessing your banking relationships. Will your existing bank(s) be able to service you adequately and do they have a presence in the UK? Working with a bank who has a presence and breadth of services across sectors is vital, even down to the fundamental differences that your sector needs to be supported with. Therefore, it is important to assess your relationships in good time.

  1. Create a credible project team with authority to execute documents and properly project manage the inward investment

As with any M&A transaction, investing in the UK will consume management’s time and resources. During the project it is important to have a committed and dedicated team who have board level authority. Project management teams should ideally include management, outside advisers and operational experts.

Negotiations, even at the preliminary stage, can be lengthy with long periods of silence between key stages. It is therefore important to keep communication channels open at senior levels. We believe a corporate transaction is a significant milestone in a business’s lifecycle and therefore board level buy-in and signoffs should be timely obtained.

  1. Innovative solutions can minimise or avoid deal leakages

UK M&A activity remains one of the highest globally; the UK economy is one of the strongest and most innovative G7 economies.  Innovations in transactions continue apace as often the headline value is not always the purchase price paid.

Innovations include the use of locked boxes, warranty and indemnity insurance, escrow accounts, deferred consideration, buy out of certain obligations by a third party (e.g. pension obligations), corporate loan notes, asset sales and subsidiary swaps amongst other ways used to minimise deal leakages.


Intern, BABC Chicago

Brexit – A Bridge or a Break?Brexit – A Bridge or a Break?

(A special session of the Speakers Series, featuring the thought leadership of senior executives.  This event was a panel discussion, with Stephen Potter (President, Northern Trust Asset Management), Paul Theiss (Chairman, Mayer Brown), Dr. Stephen Bridges LVO (British Consul General, Chicago), and Ingrid Gardner (Head of UK/US Tax Desk, BDO), and moderated by K. Thomas Stevens (President, BABC Chicago)


A month into the Brexit referendum results in the UK, the BABC Chicago held a panel discussion which drew over 160 participants despite the Summer holiday season.  This event is expected to be the first of several, and was purposefully on a higher-altitude perspective, in that at the moment too many variables remain unknown and too many stakeholders (both within and without the EU) have yet to show their cards.  As remarked by Stevens in opening the discussion, “to provide today hard and reliable advice, gross or granular, would be a fiction.  That said, we can benefit today from an understanding of reasonable expectations, timescale, and forward milestones – those canaries which will hopefully indicate good, progressive conditions.”  The panel discussion was set up to consider some of the potential issues and opportunities arising from the result. Was the result from the the referendum a Bridge or a Break? The panel included Stephen Bridges, the Consul General to Chicago; Ingrid Gardner, Managing Director UK/US Tax desk at BDO New York; Stephen Potter, President of Northern Trust Asset Management; and Paul Theiss, Chairman of Mayer Brown. With the overall expertise of the panel in the financial sector, the focus of the event was inevitably from this perspective with additional insights at the implications for other sectors. As well as this field expertise from business, we have an insight from the UK government in the form of the Consulate General. The event was chaired by BABC Chicago director Tom Stevens who geared questions towards the opportunities and issues of the Brexit result.

Theiss’ comment “businesses love certainty” seemed to lead the start of the discussion and remained an important touchstone throughout.  While the leave decision was inherently destabilizing because it will press the UK and remainder of the EU down a path which is both undefined and unscheduled. Too much business opportunity exists and too much capital demands deployment and return for the heads of companies on each side of the Atlantic to simply stand idle and await clarity over what might take the better part of two years.  Thus, that “certainty” might start to be found in smaller pockets, and that “love” might need to temporarily settle for a luke-warm hug.

It was also highlighted that both business and government are offered a chance to engineer policies which work out the best possible options for taking the UK forward and that, therefore, perhaps a slower and more deliberate approach is warranted – even in the context of a craving for certainty. The appointing of a well-respected Prime Minister, a quick but thoughtful seating of new cabinet and the creation of new departments have helped to ease some of the tension surrounding the uncertainty. Bridges emphasized that the result was the will of the people and must be respected, stating that the country and government were determined to exit the EU and that they must now focus upon progressive, stable planning and execution. The Consul General commented upon the agility and responsiveness of the UK democratic process.  There was agreement on the panel that the government has acted diligently in the speed at which it elected a new Prime Minister but before any major business decisions were to be made, there was a consensus of waiting to see what will happen. However, Potter stated that some businesses would need to restructure operations given the reality of London not being within the EU:  some European banks might be pressed to consider moving elements to EU locations. Despite this, he did emphasize that London shall remain a strong and leading centre for financial services and that Northern Trust will retain a substantial and important presence there. It is clear that the disruptive uncertainty of the leave vote is concerning for multinational companies.

While London will remain a financial centre, its recent emergence as such means that any hit to the sector will have repercussions throughout London and the rest of the UK. As Gardner highlighted, the UK government has worked hard over the past 8 years to increase attractiveness for business, promoting London and the UK generally as a strategic entrance partner to the EU’s market. Gardner outlined several additional incentives which might be considered, including possible broadening of the scope of the “patent box” to capture greater R&D activity in the UK and programs to encourage greater employment.  The question arising now is how will it carry this on? Bridges assumed a role of reassurance, stating that Britain may likely reduce its corporation tax, from an already attractive 20% to 17% which will encourage business to stay in the UK and reduce the fallout from leaving the EU. Bridges, continuing this role, stated that Brexit should be seen as an opportunity. He was quick to emphasize that a vote to leave the EU was not a vote to leave Europe and that, as a country, it would still play a key role in global affairs, maintaining its commitments to NATO and being an active member of the UN Security Council and the G8. He admitted that there would be some challenges ahead, especially surrounding the uncertainty of Brexit, but made it clear that the government would take its time to “get it right”. This does mean that there will be a prolonged period of uncertainty but the end result will be greater stability. As a timeframe, Bridges stated that the UK would likely trigger Article 50 in early January 2017 in order to leave the EU by 2019. This would fall best in line for the EU’s financial year but also allow enough time prior to the 2020 general election.

A question from the panel Chair changed the tack of the discussion, asking whether there were any sectors that will be better off or any that have become more vulnerable because of the vote? As stated previously, Potter and Theiss believe that there will be some vulnerability within the financial sector which will have an impact on other industries. Since this event took place, there has been a dramatic decrease in the manufacturing industry within the UK attributed to the referendum result which was alluded to by Theiss as an area of vulnerability. However, Gardner was more positive, highlighting that the tech industry will now have greater opportunities within the UK as EU regulations are lifted. Bridges agreed with this, emphasizing that the UK was now able to become more open to the world, attracting free trade deals from other countries and remain one of the world’s most open and liberal countries to do business.

Another question from the audience targeted the effect that Brexit would have on Scotland and Northern Ireland. There was a general agreement that Northern Ireland would not be badly hit by Brexit, despite having a border with the Republic of Ireland. What they don’t want to see is a “hard border” between the two that will stifle business opportunities. The UK (as a whole) and Ireland share substantial amounts of trade which will continue after the exit is completed.  Bridges was quick to state that the UK government’s position regarding Scotland was that it is a foundational part of the United Kingdom, as evidenced by Boeing’s recent announcement of a large manufacturing facility at RAF Lossiemouth in Moray, effectively doubling its UK workforce to some 4,000 jobs; there was currently no movement towards another independence referendum.

Following this, there was a question from Stevens regarding the opportunistic nature of other countries in trying to get an edge over the UK as it begins the process of leaving the EU. Gardner highlighted Ireland as “trying to become the new UK”, stating that it was making efforts to seem a more attractive option to businesses – especially American business — that wanted greater access to the EU markets. Bridges disputed this, citing that the UK and Ireland were “different entities” and that  the UK’s economy was far greater than that of Ireland and therefore continued to be a more attractive option for business. Moreover, he argued that the UK’s economic growth was far greater than that of any other European country (with the exception of Germany) despite the results of the referendum. However, Frankfurt had been highlighted on a number of occasions as being a challenger to London’s strong European hold as the financial capital and would make moves to entice multi national corporations to it, especially from the financial sector.

Throughout the event, the three industry representatives were speaking not only from the perspective of thought leadership but also from their own business perspective, with their own “skin in the game”, each with thousands of employees and significant capital investments within the UK. There was a commonality between the panelists and many members of the audience, searching for answers and some degree of certainty which is, for now, hard to find. Future BABC Chicago Brexit events will have thought leadership from different panelists with their own experiences in sectors such as manufacturing, agriculture and non-sector specific concerns like intellectual property.

Highlighted within this discussion, when considering “Brexit – a Bridge or a Break?”, neither a break has been caused nor has a footsure bridge been built, and thus the dialogue continues.