US Firms use Weak Pound to Pounce on UK Companies

The pound has been on shaky ground ever since the Brexit referendum, having suffered some major fluctuations over the course of the last few years. Most recently, the currency sunk to the tune of 1.3 dollars in the aftermath of Prime Minister Theresa May’s address earlier this month, in which she took adopted a more hostile tone towards the EU. This led to more concrete worries over a hard Brexit, and caused the largest drop in the value of the pound so far this year.This, in turn, has led to some major investment from US firms, who are taking advantage of the situation to scoop up established UK businesses at bargain prices. So much so, in fact, that US investment in the UK has doubled for 2017-18 from just over £36 billion in the previous year to £79 billion.

Unique US Opportunities

While the value of the pound is a major factor in this recent surge in US investment, it isn’t the only reason – there are a number of other aspects at play which have created the perfect buying environment for American companies.

The uncertainty of Brexit and unstable pound has put off many European investors, for example. The general perception of Brexit across Europe is also noteworthy, according to UK accountancy firm Moor Stephens, because: “Brexit has also been perceived more negatively on the continent by politicians, business groups, and the media than in the US, making European businesses more cautious about acquiring UK companies.”

These combined elements have created a very appealing climate for US investors, who haven’t wasted any time in making a number of major purchases while the going is good.

Why British Businesses?

It’s not just about the right climate of course – British businesses have something that their American investors want: Innovation. Not only that, US investors are also on the look out for businesses that are well managed and competently run. This means that given the bang for buck UK businesses can currently offer, now is the perfect time for US buyers to pick up well oiled, high performance businesses for minimal expense. Interestingly, US analysts hadn’t predicted this level of international investment from US firms either, mainly due to the fact that Trump’s tax reforms encourage US companies to reinvest on home turf.

Which Firms Have Been Bought?

Some of the biggest deals so far are listed below.

• Shazam acquired by Apple.
• Costa Coffee (Whitbread) acquired by Coca Cola.
• Jardine Lloyd Thompson acquired by Marsh & McLennan.
• Probiotics UK acquired by Archer-Daniels Midland.
• Hermes Fund Managers acquired by Federated Investors Inc.
• Metapack Ltd acquired by Stamps Inc.
• Huddle acquired by Turn/River Capital.

Whether this trend will continue could very much depend on the performance of the pound in the coming months, but one thing is clear: Despite Brexit, UK businesses are still held in high regard across the pond. As Moor Stephens aptly commented: “The confidence that US investors have placed in the UK is indicative of the underlying strength of UK businesses, and the openness of its economy.”.