Brexit Roller Coaster Creates Bumpy Ride for M&A

As U.K. Prime Minister Boris Johnson vowed he’d rather die than delay Brexit, the nation’s merger watchdogs were quietly gathering information on a few key transactions they thought they’d have to vet if Britain crashed out of the European Union (EU) on Halloween.

But on Tuesday, with Brexit on hold and plans for a December general election taking shape in London, the CEO of the nation’s Competition and Markets Authority (CMA) hinted at a modicum of frustration over another false alarm as he spoke at a Brussels antitrust conference.

“The situation essentially changes day by day,” said Andrea Coscelli, who runs the CMA, when asked about the Brexit situation. “You know as much as I do.”

A U.K. exit from the European Union without a legal accord would instantly force Britain’s merger authority to take charge of several big deals handled by the European Commission in Brussels. While the U.K. does examine some smaller mergers, large transactions between companies that generate significant revenue in several European countries almost always go to EU regulators.

“We were preparing for a possible no-deal outcome; it was clearly a material possibility,” Coscelli told the Global Competition Review event. “We identified a handful of transactions” in the EU system “that would come to us with no-deal exit and for where, for a variety of reasons, we felt it was an important U.K. nexus and we wanted to play a major role in them.”

Coscelli didn’t name the companies that are engaging with the CMA on a potential review. Some “have been very open to it; others were a bit more cautious,” he said, as the U.K. doesn’t technically have jurisdiction to rule on these transactions as things stand.

London Stock Exchange Group Plc’s proposed takeover of data firm Refinitiv is one tie-up that may need a separate U.K. review in a no-deal scenario, according to Bloomberg Intelligence analyst Aitor Ortiz.

Regulators want to “really try to do enough to make sure that if certain scenarios play out, companies are not in a difficult position,” Coscelli said. “Our pitch was very much: It is in your interest to engage with us because obviously if you suddenly end up with U.K. jurisdiction, it’s not particularly helpful.

“If this week plays out the way it looks like—so we end up now with a three-month extension essentially—we’re going to go back and look at this list and see whether anything needs to change,” he said. “My working assumption is that we continue this process.

“As things stand, the U.K. could still crash out with no deal at the end of January, or depending on the outcome of a possible election that might happen or not between now and then. So it is clearly very complicated.”

Coscelli sounded disheartened when asked whether the CMA was changing any of its merger rules, beyond a proposal for an overhaul earlier this year.

“Things are changing too fast really to sit down and think,” he said. “You need a long time period to change policies, it’s as simple as that.”

–With assistance from Christopher Elser.

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