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US-UK tech deals hold steady despite Brexit, Deloitte says

There is some good news for US dealmakers and their counterparts across the pond, despite a drop in mergers and acquisitions volumes worldwide

[NEW YORK] There is some good news for US dealmakers and their counterparts across the pond, despite a drop in mergers and acquisitions volumes worldwide.

Technology, media and telecommunications transactions remain resilient, driving both volume and value in deals between UK and US companies, according to a report from Deloitte LLP. That's despite the uncertainty surrounding the UK vote last month to leave the European Union, which could wipe as much as US$1.6 trillion from future mergers and acquisitions, according to a separate study.

The Deloitte report focuses on M&A activity between the US and the UK in the first half of 2016.

"TMT businesses are likely to be more 'Brexit resistant' than others," Richard Parsons, head of Deloitte's UK private equity coverage, said in the report.

Resilience in the technology industry is supported by mid- size deals, the report said, such as Playtech Plc's US$153 million bid for Best Gaming Technology GmbH and Cypress Semiconductor Corp's US$550 million acquisition of Broadcom Ltd assets.

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Deloitte expects the tech industry to support cross-border deal making between the countries throughout the year. Innovation in the US tech industry should support UK outbound deals, while the relative strength of the dollar against the pound will increase the US appetite for UK targets.

Transactions between the two countries announced post- Brexit vote include British turnaround specialist Melrose Industries Plc's US$2.81 billion takeover of US ventilation company Nortek Inc, and MasterCard Inc's US$920 million proposal to buy Britain's VocaLink.

UK tech companies are particularly well-positioned to be acquired by US competitors, said Paul Staples, a partner at Deloitte for UK advisory corporate finance.

"There are hundreds of tech companies worth US$100 million or less in the US and in the UK," Mr Staples said in the report. "While the US owners tend to hold equity until they are late in life, in the UK, owners sell much earlier."

Despite the optimism, Brexit is still looming over dealmakers. While there are US-UK cross-border deals on the table, Jason Richards, a partner at Deloitte focused on UK transactions, said that "some deals are taking a breather" amid uncertainty in the wake of the Brexit vote.


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