PE firms to decide on UK future by September

A number of UK private equity firms expect to take a decision on whether to relocate to or set up operations on the European mainland by September, according to a legal source.

The timing takes into account both the current Brexit timetable and the lack of clarity on the post-leave landscape for private equity, and will enable companies to transition away from the UK with minimal disruption to their business, clients have told law firm Goodwin.

Private equity firms have been making contingency plans since the UK voted to leave the EU last June, and many have already established a presence on the mainland, including EQT and BC Partners. Luxembourg has been a particularly popular choice of jurisdiction.

A year after the vote to leave, uncertainty about the UK’s future relationship with the EU 27 remains. Negotiations between Brussels and Westminster began on June 19, but little clarity has yet to emerge.

The uncertainty is making it harder for private equity firms to do deals, conduct due diligence and value potential investments. But given the typical lifespan of a private equity fund – five years to invest and five years to realize the investments – firms cannot afford to wait around and have to put their money to work.

“I think the ideal scenario for PE funds now would be a two-year moratorium after Brexit (during which the existing European regulations and permissions/authorisations continue to apply) so that funds have the time (and limited amount of certainty) to take a close look at where Brexit comes out and then work out what they want to do,” Mark Soundy, a private equity partner at Goodwin, told pfm.