Brexit surprise: British businesses are buying up overseas rivals

How’s this for counter intuitive data. Despite Brexit, and the pound’s status as the currency markets’ favourite punch bag, British companies went on a shopping spree in the months after the referendum.

According to the latest figures from Thompson Reuters, post-Brexit vote (from June 24 to March 13) deals involving UK companies as the target (inbound M&A) totaled $111bn (£91bn). Deals involving UK companies as bidder (outbound M&A) came in at $121.5bn, a 33 per cent increase.

The numbers have been pushed up by British American Tobacco buying Reynolds American ($60.2 billion), and Reckitt Benckiser gobbling up Mead Johnson ($17.8 billion).

However, the figures run against the prevailing narrative that holds that UK companies are more likely to end up as prey than as predators because the weakie pound makes them cheap as chips for foreign bidders. The latter can use shares denominated in stronger currencies to pick them off.

So could this be seen as more comfort for Brexit backers, not to mention yet another nail in the forecasters’ coffins?

You might think so. But there is a alternative explanation. UK based companies face operating in a “home” economy wracked with uncertainties, and they’re only going to get worse.

Its political class has enslaved itself to an ideological dogma to the extent that fringe figures, and sometimes even out and out loons, are not only taken seriously, they are, in fact, setting the agenda. Hence hard Brexit, and threats to wreck the British economy by pulling out of the EU without any deal and relying on tariffs set by the World Trade Organisation. Of which a Britain suddenly outside of Europe might not be a member.

A place where rational behaviour has taken a holiday is not a happy place for any rational business to be. One good reason to engage in outbound M&A is that it might help shield you from the effects.

Of course, every deal is different, and so are the motivations of every bidder and, indeed, every target. You have to be a shade careful about reading too much into these figures, which can easily be distorted by blockbusters.

One of those (InBev’s acquisition of SABMiller) ensured that the global figure for all M&A involving UK companies fell over the post-Brexit period under consideration here.

All the same, if I were running strategy for a British based company, I’d want to get me some overseas earnings as soon as possible, even if the weak pound makes buying them seem expensive. The pay off of having them would more than make up of for it given how bleak the long term prospects for Britain look under its current administration,