Brexit – A Shattering Event or Unremarkable Episode for Private Equity Activity?

Abstract

In its referendum 2016, the majority of British citizens decided to leave the European Union, which lead to uncertainty for all participants in the capital markets. As an integral part of this sector, private equity investments might face barriers that have not existed so far. However, few studies examine potential implications of Brexit for private equity investors and investments on an empirical basis, which causes much speculation and argumentative deduction. This paper therefore tries to build a bridge between the theories of determinants that foster private equity activity, the literature on Brexit’s impact on the financial markets and a chapter analyzing the position papers of finance associations that were submitted to UK parliament committees. Potential areas of conflict for market participants and implications for private equity activity are thus derived, concerns and issues in the negotiations with relevance for the industry are highlighted. As a result, Brexit is considered an indirect determinant of private equity activity which might influence the activity level mostly negatively, imposing a new market barrier between the UK and EU27.