Bumper City bonuses expected from takeover frenzy after pound hits record low
Bankers could rake in bumper bonuses from a “wave of bids” by overseas buyers for UK businesses made temptingly cheaper as a result of the plunge in the pound against the dollar. A fresh frenzy of merger and acquisition activity would mean a ramp-up in payouts for City dealmakers.
Sterling fell by nearly 5% at one point on Monday to $1.0327, its lowest since Britain went decimal in 1971. The currency has fallen by more than a fifth against the dollar this year.
Richard Bernstein, the founder of the asset management firm Crystal Amber, said: “We can expect to see a wave of bids from overseas buyers for UK businesses. Their profits obviously won’t be worth as much in dollars, so asset-backed situations and brands are most valuable.”
In February, British bankers collected some of the biggest bonuses since before the 2008 financial crisis partly on the back of a cascade of takeovers from private equity firms and US corporate buyers triggered by the value of UK stocks plummeting because of Covid lockdowns.
Banks’ advisory fees were expected to have taken a knock this year after Russia’s invasion of Ukraine shook financial markets, notably denting confidence in stock market listings. However, Liz Truss’s decision to remove the cap on bonuses and the anticipated increase in takeover activity could provide a fillip for British bankers.
Bernstein said: “If the deals emerge, bankers could see much bigger bonuses, which feels hard to justify right now, when so many people are suffering from the cost of living crisis.”
The hedge fund tycoon Crispin Odey said the pound’s fall “obviously” increased the likelihood of takeovers. “We’re in the game where [the value of] assets remains up there, even if in real terms they’re going down,” he
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