ICG: Brexit will slow UK M&A

The mezzanine provider has seen a 2% increase in third-party fee-earning AUM.

Intermediate Capital Group (ICG) chief executive Christophe Evain is expecting a dip in UK M&A activity following the country’s decision to leave the EU.

“In the short term, there may be a reduced level of M&A activity in the UK, resulting in a slower investment pace in the UK and fewer realisations of UK assets,” Evain said in a trading statement.

Evain said the firm is “well placed” to deal with the uncertainty Brexit has caused, and there will be “minimal impact on fees” as the majority of the capital managed by ICG is in closed-ended funds.

“Elsewhere, it is too early to assess the impact of the EU referendum, if any, on the performance of the underlying portfolio companies,” he said.

“Currently, we do not anticipate the need for any significant organisational change, but will continue to monitor Brexit developments and react quickly to any possible impact on our business model.”

In the statement, which covers the first quarter of the firm’s financial year to 30 June 2016, ICG reported a 1 percent increase in AUM to €21.9 billion and a 2 percent increase in third-party fee earning AUM to €16.1 billion.

The firm raised €800 million of new third-party money during the period, which was “in line with expectations”.

During the quarter the firm signed four investments in Europe, taking its €3 billion Europe Fund VI to 32 percent invested, and two in North America, taking North America Fund I to 50 percent invested.

Evain said that long-term market conditions remain favourable for alternative asset classes “as institutions search for yield in the continuing low interest rate environment and banks withdraw from the investment market”. The flexibility of the firm’s balance sheet capital and third party fund mandates position it to capitalise on any market opportunities that could present themselves in the current environment, he said.

At the firm’s annual general meeting today Justin Dowley was set to step down from his post as chairman after more than 10 years on the group’s board. He will be succeeded by fellow board member Kevin Parry, who was previously senior independent director on the board and chairman of the audit committee.

Parry was previously chief financial officer at Schroders and a managing partner at accountancy firm KPMG, as reported by Private Equity International.

Non-executive director Peter Gibbs was set to replace Parry as ICG’s senior independent director.