Brexit: first reactions

Just hours after the announcement that the UK is to leave the European Union, private equity practitioners are clearly unsure as to the medium- and long-term impacts of the UK's decision to leave the EU.

According to a senior corporate financier in the UK, none of the transactions he is working on contained Brexit clauses in them. However, he noted that the result will surely prolong deals currently in processes and could even derail transactions. On the other hand, the source said that now the risk is more understood, people may simply carry on as normal.

Jackie Bowie, CEO of JC Rathbone Associates echoed this sentiment: "Now that the binary decision has been made, the question now is what the new environment will look like." She highlighted the weakness for sterling being one of the most important issues, but questioned whether that could mean interest could grow for UK assets given their fall in value.

All sources contacted this morning noted the impact on lending, particularly for bank lending as these institutions already have complex decision making processes, which will only be made more complicated. However, the sources said that direct lending funds will be less impacted.

For private equity firms looking to exit portfolio companies via the public markets, there are likely to be delays to these processes, if not total abandonment of IPO plans.

Leader of the pack
For many, the UK remains a steady market with a good financial services sector that will continue to facilitate deals regardless of today's news. However, it seems the political upheaval off the back of prime minister David Cameron's decision to step down is causing most concern, as the UK's new political leadership could take months to clarify.

In a statement, Simon Witney, private equity specialist at King & Wood Mallesons, said it will take years to "unravel the full ramifications of the vote. Market uncertainty will now make the UK a very challenging environment for investors – although no doubt there will be opportunities, especially for non-sterling denominated funds."

Brexit or no Brexit, investors still need to invest" – Kieran Toal, Shoosmiths Manchester

Witney went on to urge private equity and venture capital firms to take an active stance, rather than to watch on the sidelines. He said the voice of private equity must be heard in order to express its views on what is wanted from the ensuing negotiation.

For Kieran Toal, partner in the corporate team in Shoosmiths Manchester, the impact on private equity will not be huge. "Of course we are dealing with the relative unknown, but the bottom line is: Brexit or no Brexit, investors still need to invest."

Anna Gervasoni, general manager of Italian private equity association Aifi, said: "There will be large macroeconomic impacts on the continent's economy and the uncertain situation will not be positive for Europe."

In line with Toal's sentiment, Gervasoni believes the situation for Italian private equity will not be alarming, and that fundraising activity from UK-based investors will continue as it will from US and Asian LPs.

Gervasoni highlighted challenges could be more acute for pan-European firms than for single country funds: "The large pan-European GPs will probably undergo a period of uncertainty though, and there may be several difficulties in their investment activity."

But the UK's decision to leave could create opportunities for other countries in Europe to take London's place as the continent's financial services hub. "The result of the UK referendum opens up opportunities for continental Europe in terms of which European city will take the role of main financial market in the continent. This is a crucial chance for Milan and Italy to win attraction for investors," said Gervasoni.

Edmund Truell, chair of Disruptive Capital Finance was delighted with the result, and in a statement said: "The City, more than any other UK sector, has suffered decades of attacks from an EU anxious to bring London down and promote the interests of Frankfurt and Paris. It will be freed from the stranglehold of directives, blizzards of rules, and costly regulations that made it less competitive against the real financial centres of New York, Singapore, Hong Kong and Tokyo. We already have to register in multiple EU jurisdictions to trade – so much for the single market – so that makes no difference. The existential threats of FTT, Solvency II, euro bailouts... are all left behind. The transient fall in the pound will usher in a new era of strong economic growth in a free world."

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• UK / Ireland
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