The shockwaves that have rippled through global markets following the UK’s decision to exit the European Union are likely to contaminate corporate activity which, in 2015, had amounted to more than $3.8-trillion globally, according to business advisory firm Grant Thornton.
 
Even the prospect of buying cheap or distressed assets in South Africa that had appeared attractive, given the weak currency, was now no longer a clear-cut decision, noted Grant Thornton corporate finance head Chris Staines.
 
“The biggest impact from the Brexit decision is the heightening of global uncertainty. The last thing that companies will want to do is buy a business if they’re unsure even of their own prospects or future,” he said.

He added that, with global stock markets and currencies thrown into turmoil, and concerns about South Africa’s future trading position with the UK, these factors were compounded by an uncertain future.
 
“We therefore expect any corporate deals that may have been contemplated to be placed firmly on the back burner.”
 
The latest Grant Thornton International Business Report (IBR) on mergers and acquisitions (M&A), released in June, showed that South African business executives were less upbeat about acquisitions, as well as the prospect of being the subject of a buyout.
 
The data in the M&A IBR was drawn from interviews between September and November 2015 with more than 2 500 CEOs, MDs, chairpersons and other senior decision-makers in mid-market companies worldwide.

In South Africa, 100 executives were surveyed for the M&A report.
 
Local sentiment towards acquisitions dropped by 28% between 2014 and 2015 among executives, with only 39% of respondents indicating that they had seriously considered at least one acquisition in the past year.

Globally, sentiment was slightly lower at 36%, but that had declined by only 17% from the previous year. Sentiment on the rest of the African continent was much more positive, despite a slight decline from 53%, with 44% of executives indicating past interest in eyeing acquisitions.
 
The far larger decline, however, was in executives’ sentiment towards the prospect of being bought out. This dropped 40% from 2014, with only 17% of South African executives expecting this kind of activity, compared with 29% previously.

“This presents a marked decline, despite local sentiment still being higher than the global average (9%), where growth has been far more sluggish than in emerging markets,” he said.
 
Staines added that this slowdown may be more reflective of the realisation that sellers were not going to command their asking price; they were, therefore, adopting a wait-and-see approach.
 
“There is undoubtedly still interest from global firms, but the prices they’re prepared to offer have come down substantially, as investments here are considered more risky,” he stated.