The UK's referendum for the European Union is fast approaching; the benefits and pitfalls of a Brexit are being vigorously debated on all sides, with a range of perspectives highlighting the potential effects on economy, industries and society. According to a new survey on the matter, UK’s private equity industry is keen to stay within the EU.
Over the past months, dozens, if not hundreds, of politicians and business leaders have taken part in a sharp debate on whether or not the UK should remain a member of the European Union. In a bid to understand the sentiment within the private equity (PE) sector in the UK, RSM carried out a survey among 100+ professionals in the industry.
According to the headline results of the survey, 67% of the respondents are intending to vote to stay within the EU, while 22% will vote for exit – 11% are yet to decide. The research found that one of the principal influences on almost the majority (47%) is free trade agreements with EU countries, while 15% said that red tape and regulatory issues would be the deciding factor.
Adam Spencer, Associate Director in RSM’s M&A and Private Equity team, comments: “The EU referendum debate is clearly high on the agenda of private equity at this time. If management teams or vendors are commencing a PE fundraising process ahead of the referendum we would urge them to carry out thorough and detailed contingency planning, considering the impact to their businesses in the event of a ‘leave’ result.”
Leaving worse off
74% of the respondents are concerned that a ‘leave’ vote would worsen the conditions for private equity deal making in the first two years following the vote, while, even in 2-5 years following the vote, respondents still expect conditions to be worse than they are today. Around 23% said that the poorer conditions may last up to five years after the Brexit.
“I think there is real concern amongst the private equity community that if the UK does leave the EU, then immediately afterwards we could see deal processes taking much longer, as well as an increase in the cost of transactions. This could result in a lower number of completed deals taking place, as well as increase the amount of pressure on private equity funds to deploy capital – certainly for the short-term,” says Charlie Jolly, RSM’s Head of Private Equity coverage. “Whether this is having an influence on transactions ahead of the Brexit vote is difficult to say, but the uncertainty alone will almost certainly be playing on the minds of private equity professionals and may very well be impacting their decisions over the next few weeks.”
According to a recent survey by Deloitte, held among 120 CFOs of large corporations, 75% of CFOs favour the UK remaining in the EU, up from 62% in Q4 of last year. Advocates state that membership helps UK export performance, and support the attraction of foreign direct investment. Around 70% of CFOs believe that EU membership contributes to the success of UK’s financial services industry.