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Is Macquarie Group Ltd ready for a Brexit disaster?

Shares in Macquarie Group Ltd (ASX: MQG) traded marginally higher at $114.36 today after rumours broke that the investment bank was interested in buying UK equities broker Liberum for around $177 million.

According to reports in the News Corp (ASX: NWS) press Macquarie is looking to bolster its presence in the institutional equities broking space, and has also considered German brokerage Berenberg as another acquisition target because it has the added advantage of not being affected by the potential for the UK to leave the European Union without an alternative free market access deal being agreed.

The prospect of the UK leaving the EU with no Brexit deal must be weighing heavily on the minds of senior Macquarie management right now given its European headquarters is in London. Also, the group has operated there for nearly 30 years with more than 1,400 staff employed.

It reports that it has progressed additional financial services and license applications in Luxembourg and Ireland in response to the Brexit problem, however, its planning is unlikely to have factored in the possibility of the UK not striking a free market access deal of sorts with the EU before the early 2019 final deadline for a deal.

Therefore its share price could be volatile over the next couple of months as a “no Brexit” deal outcome will have negative consequences for its substantial financial services operations based out of the UK.

Brexit aside Macquarie is a strong global business that recently told investors to expect profit growth in the region of 15% for the financial year ending March 31 2019. This after it announced the deal to sell Quadrant Energy for around A$3 billion would go ahead with Macquarie’s share of the proceeds at around 22%.

Over the past year the Macquarie share price has climbed around 14%, which compares favourably to negative returns delivered by the ASX’s domestically focused big banks.

For example in the same period the Commonwealth Bank of Australia (ASX: CBA) share price is down 10%, the Westpac Banking Corp (ASX: WBC) share price is down around 16% and the Australia & New Zealand Banking Group (ASX: ANZ) share price is down around 7%.

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Motley Fool contributor Yulia Mosaleva owns shares of Commonwealth Bank of Australia and Macquarie Group Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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