Britain's shock vote to leave the European Union chilled deal making activity involving British companies to the lowest level in at least two decades as bosses grapple with what Brexit will cost, Thomson Reuters data shows.
The figures give a glimpse of how Brexit and an array of wider global uncertainties are affecting the behavior of chief executives, and the teams of bankers, lawyers and advisers who make money from buying and selling companies.
Headline-grabbing deals such as the audacious $32 billion bid by Japan's SoftBank for Britain's most valuable technology company ARM might make it appear that all is well in the world of mergers and acquisitions (M&A).
However, the aggregate number paints a different picture.
The number of deals involving UK companies fell to 707, a total value of $87.43 billion, in the 11 weeks since the Brexit vote. That was down from 1,060 deals worth a total of $125.22 billion in the same period last year, according to Thomson Reuters data of pending and completed mergers and acquisitions.
While the total value of deals where British companies were targets rose to $45.77 billion from $45.66 billion over the period, it was bolstered by the Softbank-ARM deal.
The number of deals involving British companies and the number of deals where British companies were takeover targets both fell to the lowest level in at least two decades.
"There is no doubt about it: M&A activity has declined," Tim Gee, London-based M&A partner at law firm Baker & McKenzie, told Reuters. "You see very significant caution."
"There is still a reasonable amount of activity by outside investors buying into the UK but there is very little UK to UK activity," Gee said. "This year is going to be off -- there is no doubt about that."
SOFTBANK STEPS IN
The Brexit vote took many investors and chief executives by surprise, triggering the deepest political and financial turmoil in Britain since World War Two and the biggest ever one-day fall in sterling against the dollar.
But less than a week after Theresa May entered Downing Street to replace David Cameron as British prime minister, Softbank founder Masayoshi Son made his move for ARM.
Despite warnings before the vote that Brexit would shatter economic confidence, some positive data since the vote has stoked the perception that the British economy could prosper.
The Confederation of British Industry said this month that the economy had largely avoided a big hit from the Brexit vote but ratings agency Standard & Poor's said that signs of a recovery may prove to be a "mirage".
The Softbank deal and much better economic data than was predicted have been cited by May as evidence that investors are confident that Britain will make a success of Brexit.
"The single biggest vote of confidence on investment in the United Kingdom since we had the vote to leave the European Union came, of course, from a Japanese company - from SoftBank with its 24 billion pound takeover of ARM," May told parliament last week.
Softbank's takeover of ARM accounts for more than a third of the value of deals involving UK companies in the post-Brexit vote period, Thomson Reuters data shows.
"The Softbank-ARM deal really skews the data on the value of deals. If you take out Softbank-ARM, it was pretty quiet," said one top banker who spoke on condition of anonymity because he was not authorized to speak publicly.
"For a bank the revenue pool is driven by the number of deals which is a better approximation of the available fee pot than volume because of the lumpiness of volume," the banker added.
Without Softbank-ARM, the value of M&A involving British companies and deals targeting British businesses would also both be significantly below trend for the last decade, and around the lowest level since the 2008 financial crisis.
PIERCING THE GLOOM
The ARM deal generated several hundred million dollars in fees for bankers and advisers and also ensured Goldman Sachs, Lazard and UBS topped the ranking of post-Brexit UK involvement M&A, according to Thomson Reuters data.
Goldman, which said before the June 23 vote that it may restructure its British operations if voters opted to leave the EU, was top of the ranking, advising on $49.6 billion of UK deals, followed by Lazard and UBS.
Softbank advisers Raine, a U.S. boutique investment bank, London-based Robey Warshaw and Japan's Mizuho Securities came fourth equal in the rankings, again due to the ARM purchase.
Even after the turmoil triggered by the Brexit vote, bankers said the deal data was better than they had expected on June 24 -- the day of the Brexit result.
Bankers pointed to other big transactions including last week's proposed purchase by Britain's Micro Focus of Hewlett Packard Enterprise Co's software business in an $8.8 billion deal.
"The summary is that UK M&A activity is stronger than we would have anticipated in the aftermath of the UK's EU vote" said Matthew Smith, co-head of UK investment banking at Barclays.
"Based on what we have seen in the last three months we expect a fairly robust pattern of M&A," said Smith, who pointed to the devaluation of sterling and cheap borrowing as positive for the British M&A market.
The decline in sterling has made it cheaper for foreign companies to snap up British targets, said Eamonn O'Hare, chief executive of the listed investment firm Zegona, set up to buy TMT companies in Europe.
"UK assets are very vulnerable to international takeovers because of the impact of the 20 percent depreciation," he said. "There are quite a few companies that have got foreign currency incomes and their share prices have fallen."
For sure, 2015 was a record year for global M&A, marked out by Anheuser-Busch InBev's $100-billion-plus bid for SABMiller.
Worldwide deal making totaled $4.7 trillion during 2015, an increase of 42 percent compared to 2014 and the strongest annual period for merger activity since records began in 1980.
Over the first eight months of this year, global M&A fell to $2.2 trillion with 28,720 deals from $2.9 trillion on 30,894 deals in the same period last year.
Even before the vote, Brexit jitters had taken a toll with M&A activity in Britain and Europe at its lowest as a proportion of global activity in a generation.
Bankers, many of whom warned before the vote that Britain would lose business from Brexit, said they saw a host of concerns that could dampen sentiment, including the outcome of the U.S. presidential election in November, French and German elections next year, terrorism and euro zone growth.
In Britain, bankers said they were looking for clarity on what Brexit might mean for companies, the new government's views on takeovers of British companies and a decision by PM May on the $24 billion Hinkley Point nuclear power project.
British politicians have objected in recent years to some international takeovers including Pfizer's failed bid to buy AstraZeneca and the successful move by Kraft to buy British chocolate maker Cadbury.
"Brexit is one of the headwinds we face in M&A including the U.S. presidential election," the senior banker who asked not to be named said.
"It is too early to say how 2017 will look. In the mid-sized business, there is a good flow of deals in the UK. The big unknown is on the big deals as it is the highest risk and requires the greatest confidence."