The value of M&A deals in the UK has dropped by 65 per cent from its previous high in 2007, findings from accountancy firm Ernst & Young show.
While global M&A volumes have halved when compared to 2007, the UK has experienced what Ernst & Young refers to as ‘one of the most dramatic drops in deal value’. However, the firm is calling on British businesses with surplus cash to take advantage of the situation to make strategic buys.
The UK has now lost its position as the world’s top outbound cross-border transactor, and now sits behind the US and Japan.
For UK businesses conducting acquisition efforts cross-border, the number of deals reached 900 and values hit $67.8 billion (£42 billion), compared to 1628 deals worth $362.5 billion in 2007.
Deal volumes have reached $133.6 billion in the UK, while volumes topped 2,284. The figures represent a 1 per cent increase and 8 per cent drop on 2011 respectively.
Jon Hughes, head of Ernst & Young’s transaction advisory services practice, says that caution and a distinct lack of confidence have underpinned M&A sentiment in 2012 and has ‘created a bias towards risk avoidance and inertia’.
‘But simply sitting on cash in the hope of an upturn is a foolhardy approach,’ he adds.
‘In a weakened market, there is a real opportunity for well positioned players to steal a march on competitors and grow inorganically by snapping up choice assets.’
Inbound M&A, involving overseas acquirers purchasing companies in the UK, accounted for 776 deals, totalling $94.4 billion.
Mark Gregory, Ernst & Young’s chief economist and transaction partner, adds, ‘Japanese corporates have perhaps developed the blue print for cross-border transactions.
‘They have shown that with little or no growth in their domestic market and a strong currency, overseas deals will help drive inorganic growth in a low growth world. UK businesses should consider a similar strategy and focus in higher growth markets where competitive advantage can be achieved.’
