The global M&A market couldface a deficit of up to $1.6 trillion in lost activity in the wake of theU.K.'s vote to leavethe EU, unless an orderly and swift Brexit process is followed, according tolaw firm Baker & McKenzie.
The law firm said Brexit's impactis not as global as the 2009 financial crisis and is instead"unsurprisingly" disproportionally felt in the U.K. and the rest ofEurope. Under the central scenario of an orderly Brexit from the EU, Baker& McKenzie forecasts that global M&A activity will be only modestlydown for the next two years before fully recovering.
In the case of the U.K., a"quick and painless Brexit" that retains the U.K.'s access to theEuropean single market will cut M&A transactions by 33% in 2017, with acumulative drop of 24% or $240 billion over the next five years beforerecovering by 2020 to reach levels at par with the no Brexit scenario. Thecentral scenario sees M&A levels in Europe falling 8% in both 2017 and 2018but recovering by 2019.
Meanwhile, an adverse scenario of adisorderly Brexit will cut M&A activity in the U.K. by 34% or $340 billionover the next five years, while M&A in Europe excluding the U.K. will benearly 40% lower in 2017 than would have been had Britain voted to remain inthe EU.
The law firm also predicts thatglobal M&A levels in 2017 and 2018 under an adverse Brexit scenario wouldbe 19%, or more than $1.17 trillion, lower.