Irish firms plot UK takeovers to skirt post-Brexit tariffs

Irish companies are beginning to eye UK takeover opportunities to take advantage of sterling weakness and plot ways to skirt possible trade obstacles post-Brexit, according to the head of accountancy and advisory firm BDO Ireland.

"More and more clients are asking us about UK acquisitions because if they are selling within the UK they'll be able to avoid currency risk and cross-border tariffs after Brexit," said Michael Costello, managing partner at BDO in Dublin.

“We have received a number of mandates since the Brexit vote to identify suitable targets, mainly in technology, engineering and the agri-food [sectors].”

The prospect of tariffs being imposed on goods and services being traded between the UK and the European Union has increased in the past month after British prime minister Theresa May outlined a tough stance on immigration controls on October 2nd, putting the country on course for a so-called "hard Brexit".

EU firms face paying £12.9 billion (€14.3bn) a year to the UK if Britain uses World Trade Organisation terms after leaving the block, London-based think tank Civitas said in a report published last week. UK exporters would, under WTO terms, have to pay £5.2 billion per annum to access the EU, it said.

While Mr Costello declined to identify any of the companies looking at UK purchases given that the process is at any early stage, he said they were typically targeting deals costing between €5 million and €50 million.

Affordable

“These are companies that have been exporting to the UK but up until now have not been thinking about buying businesses there,” he said. “The sharp fall in sterling has also made targets cheaper in the UK and therefore more affordable.”

The value of the euro has surged more than 17 per cent to about 90p since British voters decided on June 23rd to quit the European Union.

Cider and beer manufacturer C&C said last week that the value of sterling could give it a competitive advantage in the UK as it continues to eye opportunities in that market.

“To some extent sterling assets are very cheap right now, because we have a euro company,” C&C chief executive Stephen Glancey said. “You could argue that now is the time to look at acquiring UK assets.”

While Mr Costello said Irish businesses were beginning to look at diversifying their export markets, the UK is likely to remain the main European target for companies based in this country. “The similarities of language, culture and legal systems mean that the UK will still be more attractive for acquisitions than other EU countries post-Brexit,” he said.