Since 2014, Chinese acquisitions of UK companies have increased by 215 per cent, although they account for only one in 20 international acquisitions in the UK marketplace.
This according to a new study from Livingstone, which also reveals that US investors remain the largest source of international investment in UK businesses, with total inbound acquisitions increasing 5 per cent from 2014 to 2016.
According to the mid-market M&A advisory firm, buyers took advantage of the plunge in Sterling following the Brexit vote, a trend that may continue this year and beyond.
The fall in the value of sterling in the wake of June’s EU referendum lowered the prices of UK companies, and made them more attractive to international buyers. Inbound M&A surged by nearly 15 per cent, with a significant spike in Q4 2016 jumping from 514 deals to 588.
A large proportion of this rise in investment came from Chinese buyers. However, the proportion of inbound acquisitions remains relatively small, as it is coming from a low base – Chinese acquirers still account for only one in 20 international acquisitions in the UK marketplace.
Buyers from the Americas remained the largest source of international investment in UK businesses, while European deals increased by nearly a fifth (18 per cent), from 185 to 208, accounting for more than 35 per cent of all inbound deals recorded.
Driving this growth was the business services sector, which grew at a rate of nearly 40 per cent, reflecting the UK’s strong service-led economy. The UK’s media and technology sector followed closely behind, growing by 25 per cent year-on-year, and accounting for nearly a quarter of all inbound M&A deals. This figure is up from 20 per cent in 2015.
According to Jeremy Furniss, London-based partner at Livingstone, 2016 was just as strong a year for M&A activity as it was for political change. “The rapid increase in acquisitions by Chinese investors has attracted attention across the world, and is set to continue. Our findings highlight that M&A activity into the UK has grown at a record pace as investors from Europe, the Americas and Asia take advantage of the cheaper pound to acquire successful companies in a strong economy,” he explained.
“The current interest rate environment remains at historically low levels, which in turn creates continued appetite for acquisitions that have the potential to generate solid returns – and we see no reason for this to change in 2017. This landscape, coupled with the UK’s strong tech scene driving innovation and reacting to disruptive technologies, will continue to encourage further foreign interest in UK businesses this year.”
The report, The Acquirers – A Global Review, includes yearly data from deals conducted between 2014 and 2016, across the UK, USA, Europe, and Asia. The data comprises inbound deals and cross-sector investment.