Mike Weaver, Managing Director and Head of Valuation Advisory Services, EMEA, was quoted in the Wall Street Journal regarding the effect a no-deal Brexit could have on goodwill impairment in the UK.
In the event of a no-deal Brexit, the UK's gross domestic product (GDP) would shrink between 5% - 8%; there could be a decline in the UK's economic activity; and the value of British firms' recent deals could decrease - prompting a series of goodwill impairments - cites The Wall Street Journal.
The Wall Street Journal reports that the uncertainty surrounding Brexit has already negatively affected UK deal-making, stating that deal value has decreased by 47% in 2018, and the number of deals decreased by 22% from 2017.
Mike Weaver said, "We will see a spike in goodwill impairments in the UK in case of a no-deal Brexit, and a decline in the EU.” He also advised that recent deals in the aerospace, pharmaceuticals, financial services and auto industries will be most vulnerable to write-downs.
Duff & Phelps has found that UK goodwill impairments increased dramatically in 2018. The top 15 goodwill write-downs for UK companies in the STOXX® Europe 600 index was up 63% (reaching €4.23 billion).
Read the full 2018 European Goodwill Impairment Study.
“When it comes to goodwill impairments, we have to wait a little longer before we can to see the true impact, as there is a natural lag before companies report impairments on previous acquisitions,” Weaver said.
Weaver advised that a no-deal Brexit could make companies based in the UK look for other assets and production sites in the EU, thus boosting deal-making and economic growth in other countries of the EU.
Read the full article here.
