What You Can Do to Prepare for Brexit’s Blowback
Things your firm can do now to manage the fallout
While the ultimate impact of Brexit may not be known for years, private equity will undoubtedly face challenges on two fronts—managing employees from in and outside the redrawn European Union, and data privacy issues. Firms should start planning for them now.
The primary issue will be possible changes to employment eligibility and portability, since one of the main economic underpinnings of the Union is the free flow of goods and labor across borders. Simply put—what happens to employees of EU countries working in the U.K.?
“There is significant risk if you’re investing in a U.K. business that has EU employees,” says Dan Peyton, a partner with McGuireWoods. “Firms would not have bothered with this [head]count earlier, but now they should be concerned.”
The data issues relate to the transfer, storage and retention of information that could once move freely within the Eurozone. The prospect of two sets of rules in place of one could cause logistical headaches.
Other areas investors should consider evaluating now as they await clarity on Brexit’s impact on private equity is how corporate contracts may need to be structured or restructured, how to approach taxes, and creating a roadmap for portfolio companies.
Patrick De Ridder, also a partner at McGuireWoods, cautions private equity investors against taking too negative of an approach to managing things through Brexit. He has been hearing a lot of “positive noise”—the value of the pound has dropped and assets are cheaper to acquire now than they have been in the last few years, he points out.
“Brexit provides a unique set of opportunities,” he says. “This is not a fear factor; it is an opportunity.”
By taking proactive early steps now to prepare for Brexit’s true impact, private equity firms can position themselves to not only survive, but thrive.