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UK still top for US-EU inbound M&A activity, says new report

Despite Brexit, the UK is still the top destination for US-EU inbound M&A activity, representing nearly 40 per cent of EU deals since 2009 – and activity could pick up with greater Brexit certainty.

The report, which gathers the collective thoughts of Akin Gump lawyers and senior dealmakers at global companies to see how Brexit, global trade disputes and this year’s US elections are shaping the deal landscape, also finds that even though M&A now involves additional layers of geopolitical and regulatory complexity brought on by global trade tensions and political turbulence, deals are getting done.

with Republicans and Democrats offering starkly divergent platforms on a number of key policy issues, the report says the results of the 2020 US elections are certain to influence M&A activity in 2020 and beyond.

Following a decisive UK election outcome, the report suggests that deal activity could pick up. “There is an M&A backlog, as some deals went on hold before the election,” says Akin Gump corporate partner Gavin Weir. “This bodes well for activity in 2020 as buyers and sellers return to the market.”

Sebastian Rice, partner in charge of Akin Gump’s London office, adds: “There is recognition that the [deal] process is more complex, but if you address issues early, deals will close.”

Looking at deal activity in the United States, Jeff Kochian, co-head of Akin Gump’s corporate practice, says: “The US M&A market has been very strong for the last several years. In spite of global trade and political volatility, the strong US economy and bullish equity markets have been particularly helpful to strategic buyers. Private equity has also been very active, doing more, albeit somewhat smaller deals.”

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The City must stop complaining and start talking about the opportunities of Brexit

Too much of the discussion around Brexit’s impact on the City has treated it as something of an inconvenience that must be “managed”. This is perhaps understandable — business rarely likes change, certainly not on this scale. But it’s time that we start talking about the opportunities Brexit will present to the City.

The conversation largely remains dominated by politicians, with some in the UK government championing “permanent equivalence”, while figures from the EU’s Michel Barnier to Sir Jon Cunliffe, deputy governor of the Bank of England, warn that significant divergence is both likely and necessary.

Such divergence is typically framed negatively, with the focus being on the possibility of the City losing unfettered access to the EU’s Single Market. However, I see two potential ways in which London’s financial institutions might not just survive but thrive from the opportunity presented once the transition period ends in December.

First, if the regulatory regime diverges even slightly from that of the EU by placing less onerous requirements on financial organisations, it can have a positive knock-on effect on UK banks’ performance and competitiveness


As we have seen in the US, a more flexible approach to regulation has been a contributing factor to the stronger recovery and greater profitability of the American banking industry over the past decade.

City advocacy groups are already eyeing a new regulatory framework beyond the Markets in Financial Instruments Directive (Mifid II) — the EU directive that instituted an extensive set of new obligations on banks, fund managers, brokers, exchanges, and underlying investors.

Overseen solely by the UK government, such a framework would inevitably better reflect the priorities of UK firms: maintaining financial stability and investor protections, without inhibiting the City’s global competitiveness.

The second and much less talked about opportunity is something over which financial institutions have far more direct influence. Long-established firms are in a constant struggle to keep pace with the technical requirements of regulatory change. Often, to meet tight deadlines, changes are shoe-horned into existing architectures at the expense of technical progress and evolution. This was the experience for many European banks around Mifid II’s adoption.

That represented a huge missed opportunity. The ultimate goals of new regulations are not necessarily detrimental to banks’ commercial interests. In fact, as with Mifid II, they are often directly aligned. For example, the requirement to comprehensively categorise and record all customer interactions, if done properly, can be an accelerator for better customer relationship management and risk control.

Technological advancement is already driving the reconfiguration of banks’ tech systems. The City should embrace divergence not simply as a new box-ticking requirement, but as an opportunity to expand outside of constraints and give London’s financial services the technological edge over its international competitors.

While we may be a long way from knowing where the chips will fall, and a clean break may remain the less likely outcome, firms must stop undervaluing the possibility and start considering the opportunities for the financial services industry.


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Vauxhall fears after car giants Fiat and PSA announce merger

Fiat Chrysler is to merge with Vauxhall’s owner PSA to create the world’s fourth largest car company.

The two sides say they have yet to finalise all the details, but the 50-50 merger is expected to provide significant cost savings.

That has raised concerns at Vauxhall, which employs 3,000 people in the UK, as it could be vulnerable to any restructuring.

Unions called for talks with France’s PSA, which owns Peugeot and Citroen.

Fiat Chrysler, the Italian-US business behind Jeep, Alfa Romeo, and Maserati, has been looking for a big tie-up for years, believing that consolidation in the global industry is needed to cuts costs and overcapacity, and fund investment in electric vehicles.

It has tried previously to form alliances with General Motors and Renault.

A combined Fiat Chrysler-PSA will have a market value of about $50bn (£39.9bn) with annual sales of 8.7 million vehicles. The companies said there are no plans to shut factories, but UK unions are uneasy about the impact on Vauxhall.

“Merger talks combined with Brexit uncertainty is deeply unsettling for Vauxhall’s UK workforce which is one of the most efficient in Europe,” said Unite national officer Des Quinn.

“The fact remains, merger or not, if PSA wants to use a great British brand like Vauxhall to sell cars and vans in the UK, then it has to make them here in the UK.”


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London Stock Exchange agrees £22bn deal to buy Eikon-owner Refinitiv

The London Stock Exchange Group has agreed a $27bn (£22bn) deal to buy Refinitiv in a move that will transform it into a UK-headquartered, global rival to Michael Bloomberg’s financial news and data business.

The all-share deal will allow LSE to take control of Refinitiv, whose Eikon terminals on trading floors challenge those provided by Bloomberg, from a consortium led by Blackstone and including Thomson Reuters, which owns the Reuters news service.

LSEG’s shares rose 5% to £69.50 on the news of the finalisation of the deal, giving the business a stockmarket value of £24bn. LSEG’s share price has risen by more than 60% over the last year.

“The acquisition of Refinitiv is transformational,” said David Schwimmer, the chief executive of LSEG. “It is a rare and compelling opportunity to combine two world class businesses and create a global financial infrastructure leader. We will continue to be a global business headquartered in the UK.”

Schwimmer said the deal would increase its presence in the US, the world’s biggest financial market, and also allow it to expand in Asia and emerging markets.

He said that increasing LSEG’s international exposure is not a response to Brexit and that the company is prepared for a no-deal scenario.

“LSEG has been prepared for whatever may come through Brexit,” he said. “We are already diversified across regions and by currencies. This transaction helps us become more global. This is not about Brexit.”

The finance chief, David Warren, said there would be job cuts, as part of £350m of cost savings over the next five years, but would not say how many redundancies there would be.

“I can’t quantify them, it would be too early to do that,” he said. “[There will be] employee related efficiencies.”


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Bombardier: is Northern Ireland sale linked to Brexit?

Canadian aerospace firm’s sudden decision comes at a sensitive time for UK and Northern Irish politics


The Canadian aerospace firm Bombardier is putting its wing-making operation in Northern Ireland up for sale, sparking concern among trade unions and MPs about the impact on highly-skilled jobs and fuelling fears that uncertainty around Brexit is holding back the economy.

The company plans to sell factories in Northern Ireland and Morocco as part of a strategy to consolidate “all aerospace assets into a single, streamlined and fully integrated business” in North America.

The “decision will be seen by unions and political leaders in the North as a massive blow for the economy and will cast serious doubts over the future security of the 4,000 jobs at Bombardier and thousands more in their extensive supply chain in the North”, says The Irish Times.

A spokesman for the prime minister said the government did not expect jobs to be affected but the trade union Unite said it was seeking stronger assurances from the government and the company.

“Bombardier is Northern Ireland’s largest employer and a focus of intense political interest,” says the Daily Telegraph. Two years ago Theresa May personally intervened when the US threatened 300% trade tariffs on Bombardier’s C-Series airliners, asking President Trump to veto the levies, which had been demanded by US rival Boeing in response to what it claimed were state subsidies given to Bombardier.

The sale “comes at a sensitive time for the UK”, says Financial Times, “which is grappling with the impact Brexit will have on Northern Ireland”.

The company had previously warned of “serious consequences” from a hard Brexit for its operations in Belfast.

“Although Bombardier made no reference to Brexit in its statement, efforts to find a buyer for the plant could be hampered by uncertainty about tariffs and customs arrangements between the UK and the EU,” says The Guardian. “Airbus, which might have been seen as a potential buyer of the site, has voiced grave concern about the impact of Brexit on its investment in the UK.”

The Business Secretary, Greg Clark, who has been monitoring the situation closely all week, is said to be optimistic that a buyer can be found.

However, “arriving on the same day as the local elections in Northern Ireland, the announcement comes as a blow for the region’s Democratic Unionist party”, says the FT.

The Guardian says Bombardier’s decision “will add more pressure on Northern Ireland’s politicians to restore the power-sharing executive and assembly at Stormont which collapsed in 2017 amid acrimony between Sinn Fein and the DUP”.

The assembly had discussed a plan to lower corporate tax to attract and retain industries before its collapse says University of Liverpool politics professor Jon Tonge. “The fact there is no fiscal autonomy in place – that’s where some of the blame may fall,” he said.


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Companies press Brexit panic button in further blow to Theresa May

The scale of no-deal panic gripping major companies has been thrown into sharp focus by a series of damage-limitation announcements, as corporate Britain signalled it is running out of patience with Westminster gridlock.

Sir James Dyson, the Brexit-backing billionaire, dealt a further blow to the government by revealing he is shifting his company headquarters to Singapore in a move that drew sharp criticism.

Dyson’s decision to move his HQ out of the UK came on a day in which a series of high-profile names revealed measures to mitigate the impact of a disorderly departure from the EU:

  • P&O announced that its entire fleet of cross-Channel ferries will be re-registered under the Cypriot flag, as the 182-year-old British maritime operator activated its Brexit plans.
  • Sony confirmed it is moving its European headquarters from London to Amsterdam.

The chief executive of luxury carmaker Bentley said the company was stockpiling parts and described Brexit as a “killer” threatening his firm’s profitability.

Retailers Dixons Carphone and Pets at Home announced plans to shore up supplies in the event of chaos at British ports.

P&O, which began life as the Peninsular and Oriental Steam Navigation company in 1837, said all six of its cross-Channel ferries will be re-registered from the UK registry in Cyprus to keep EU tax benefits. The ferries include, the Spirit of Britain, the Pride of Kent and the Pride of Canterbury.

Sony confirmed it was merging its London-based European unit with a new entity based in Amsterdam that would become the new continental HQ. Sony said: “In this way we can continue our business as usual without disruption once the UK leaves the EU.”

The boss of Pets at Home, the nation’s biggest pet supplier, said his company had started stockpiling essentials – including cat food – as “we don’t want families to run out of food for their pets” after Brexit day on 29 March.

Sir James Dyson failed to appear at a media event at which his company announced the relocation of its corporate base from Wiltshire to Singapore. Dyson, who was a leading supporter of the leave campaign who urged ministers to walk away without a deal saying “they’ll come to us”, did not explain why he is taking the HQ of the firm he founded in 1991 out of the UK.

The chief executive of Dyson, Jim Rowan, said the move from Wiltshire to Singapore had “nothing to do with Brexit” but was about “future-proofing” the business. The move of Dyson’s legal entity from the UK to Singapore “will happen over the coming months”, meaning it could take place before Brexit.

The decision to leave the UK was made by Sir James together with “the executive team”, Dyson said. Sir James, who owns 100% of the company, has built up a £9.5bn personal fortune making him the 12th richest person in Britain according to the Sunday Times rich list.

A spokeswoman for the 71-year-old billionaire said he would “continue to divide his time between Singapore and the UK as the business requires it”.

His company employs 4,500 people in the UK out of a global workforce of 12,000. It said the HQ move would not affect British jobs

Rowan said moving to Singapore was part of “the evolution” of the company. When asked whether Dyson could still be referred to as one of Britain’s best success stories, he said the firm should now be referred to as a “global technology company”. When he was prime minister David Cameron hailed Dyson as a “great British success story”.

Sir James is not the first pro-Brexit billionaire to pull back from the UK since the referendum. Sir Jim Ratcliffe, the UK’s richest person with a £21bn fortune, was reported last year to be planning to leave Britain for Monaco.

Carolyn Fairbairn, director-general of the CBI, said the litany of business announcements should send politicians a clear and simple message. “A March no-deal must be ruled out immediately,” she said. “This is the only way to halt irreversible damage and restore business confidence.”

Theresa May told business lobby groups on Tuesday that she was refusing to rule out a no deal as she tries to persuade reluctant MPs to back her Brexit plan by arguing that the only way to avoid crashing out of the EU is to sign up to her proposals. That amounted to a rebuke to the chancellor, Philip Hammond, who suggested last week that a no-deal Brexit would be taken off the table in another conference call with 330 corporate executives.


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Trump tells May to abandon ‘unjustified’ food standards for Brexit trade deal

LONDON — Donald Trump’s administration has said the UK must scrap “unjustified” food and agricultural standards before it can sign a free trade deal with the US after Brexit.

The US Trade Representative sent a to letter to US Congress on Tuesday, formally announcing President Trump’s intention to negotiate a free trade deal with the UK once it has left the EU.

The letter states that any UK-EU trade deal must respect the US’ Trade Priorities and Accountability Act, which requires the “reducing or eliminating [of] unjustified sanitary or phytosanitary restrictions” and “other unjustified technical barriers to trade.”

BI highlighted last month that under US food regulation, producers are allowed certain amounts of foreign bodies like maggots, rat-hair and mould in a range of food products sold to consumers.

The letter will alarm MPs, health campaigners, and animal welfare charities who have expressed concern that the US will demand the UK accepts food products of a lower standard than it does now as an EU member state.

Jo Stevens, Labour MP and supporter of the People’s Vote campaign, told BI: “Section 102 of the US Trade Priorities and Accountability Act could not be clearer – the aim of US negotiators is to reduce food protection standards to the US level and to abolish geographical indicators.

She added: “This is what the US means when it says it wants to remove non-tariff barriers and Liam Fox never denies it. Instead, he issues a standard ‘non-denial denial’ that fails to address any of the key issues.

“British consumers do not want this, did not vote for it and will not stand for it. It is disgraceful that Brexit is being used as a cover to reduce food standards and consumer protection.”

Numerous US officials including Trump himself have criticised EU rules when it comes to food hygiene.

Wilbur Ross, Trump’s Secretary of Commerce, said last October that scrapping strict EU standards in areas like food hygiene and agriculture would be a “critical component” to any post-Brexit UK-US free trade deal.

UK Trade Secretary Fox has repeatedly denied suggestions that he is prepared to “lower” or “compromise” UK food standards.

Speaking to representatives of the agricultural sector on Wednesday, the minister said: “There have been a lot of reports lately, mostly on social media, that my Department has been planning to lower food and farming standards when negotiating Free Trade Agreements post-Brexit.

“Well, today I am here in person, and let me tell you categorically that these reports are untrue.”

However, Fox has not explicitly ruled out accepting US food standards in a post-Brexit trade agreement.

He said in November he had “no objection” to UK consumers eating food products which are currently banned by the EU, like chlorine-washed chicken, after Britain leaves the EU.


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No-deal Brexit could hit food supplies

A no-deal Brexit could affect food supplies and see traders bypass Great Britain, the ferry firm Stena Line has warned.

There is “very little readiness” at ports and “anxiety is high”, said Ian Hampton senior executive at the global ferry operator.

Stena is the largest ferry operator in the Irish sea and owns three UK ports.

The government said it had proposed an ambitious future relationship with the EU to keep trade flowing.

Mr Hampton said there was a possibility Stena Line would reduce services to and from the UK as a result of Brexit.

“We can’t plan on the basis of what we don’t know, so we’re very anxious about the outcome,” he told BBC Radio 4’s Today Programme.

He warned traders could stop using Great Britain to get from Ireland and Northern Ireland to the rest of the EU, and instead sail direct to the continent.

A no-deal Brexit that created friction on the Northern Ireland border, or delays if extra checks were put in place between Great Britain and Northern Ireland to implement what’s become known as a Brexit backstop, could have a significant impact on trade flows, he said.

‘Huge concerns’

Asked if added friction at borders could result in fewer Stena Line sailings to and from UK ports, he said that while the firm did not want to move routes “this could be one of the implications”.

He called for clarity from the government about what trade declarations would be necessary in the event of a no-deal Brexit. Without it, he said, delays at ports could affect whether food got to supermarket shelves on time.

Mr Hampton, chief people and communications officer at Stena Line, was also worried about whether a new computer system to handle customs declarations – known as CDS – or its predecessor, could cope with a sharp increase in volumes following a no-deal Brexit.

“We’re concerned about that,” he said. “I’m not sure it can. This is a system that was not written for the purpose we’re now asking of it and I think that would [create] huge concerns.”

  • EU ready to extend transition period
  • Eurostar disruption risk in no-deal Brexit
  • Watch: How could Brexit affect trade with Ireland?

Stena operates three UK ports, Holyhead, Fishguard and Cairnryan, and carries more than seven million passengers and two million units of freight to and from the UK each year.

A government spokesman said it was engaging with ports, and senior officials had visited those owned by Stena Line.

“It is crucial to keep trade flowing when we leave the EU,” the spokesman said.

“That is why we are proposing a pragmatic and ambitious future economic relationship with the EU, and we remain committed to reaching agreement on the Withdrawal Agreement and future framework this autumn.”


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