Business as Usual? Important Brexit Steps for Companies to Consider.

Posted on: June 1st, 2017

29 March 2017, marked the day when the UK government delivered the formal notice to the other EU Member States regarding its exit from the EU, which officially started the Brexit process.

This now puts the onus on companies of all sizes to start their own Brexit planning, including scheduling for the various risks and opportunities and preparing contingency plans that they may need to put in place.

What companies need to do before getting back to business?

1. Review of trade agreements:

Trade agreements, especially distribution agreements, which include limitations on the ability to impose restrictions on distributors concerning pricing and cross-border sales in the EU and European Economic Area (EEA) will have to be reviewed and changed if necessary.

2. Currency and payments:

Payments, which are made under a contract, are usually made or received in a foreign currency or fixed to a particular exchange rate.

Post-Brexit consideration should be given as to whether the currency used is amended to reflect the recent drop in the GBP or other activities in the marketplace.

3. Preparation of new contracts:

If new contacts are being prepared during the two-years estimated period for Brexit negotiations, certain clauses pertaining to termination rights, force majeure provisions,and material adverse change provisions will have to be included.

4. Data protection changes:

Businesses will have to prepare for changes in data protection. This will include preparation for EU’s new General Data Protection Regulation (GDPR), which is coming into force on 25 May 2018.

They will also have to prepare for changes to UK data protection laws, and determine whether the business targets EU citizens or not.

Companies will also have to consider where personal data is processed and transferred, and decide on where the organisation’s main EU establishment will be.

5. Employment:

Regarding their human resources, companies will have to prepare for possible changes to facilitate free movement of workers and review contracts of employment, human resources policies, and practices for EU-specific or -driven terms.

In conclusion, Brexit will have a major influence on companies in all areas from policy decisions to litigation to customs issues. It is therefore wise for companies to start preparing in advance for all necessary changes that will eventually take place.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.