UK M&A hits the buffers but experts predict improvement

Merger and acquisition activity in the UK has remained low after second quarter figures for UK-to-UK deals shows that transactions fell by 39 per cent.

Findings from the Office for National Statistics’ (ONS) latest M&A numbers reveal that activity is down by 39 per cent quarter-on-quarter.

However, the value of outward acquisitions (deals abroad by UK companies) has increased significantly compared to the start of the year when 25 transactions worth £800 million were noted. For the second quarter of 2012, 36 deals worth £3.9 billion closed (see table below).

Number and value of mergers and acquisitions involving UK companies
Acquisitions abroad by UK firms Acquisitions in UK by foreign firms Acquisitions in UK by UK firms
Number Value £bn Number Value £bn Number Value £bn
2010 199 12.4 212 36.6 325 12.6
2011 286 50.2 237 33.0 373 8.1
2010 Q2 49 2.3 48 2.8 95 2.0
2010 Q3 54 5.3 59 12.4 80 2.9
2010 Q4 66 3.8 51 7.0 83 6.3
2011 Q1 70 19.8 54 5.8 76 1.5
2011 Q2 75 11.0 68 9.7 94 3.3
2011 Q3 77 6.8 68 5.1 97 1.5
2011 Q4 64 12.6 47 12.4 106 1.8
2012 Q1 25 0.8 48 4.3 62 1.1
2012 Q2 36 3.9 42 2.6 71 0.9
Source: Office for National Statistics

ONS results for domestic M&A in 2011 showed that, month-on-month, deal volumes remained consistent while values fluctuated slightly more.

So far, 2012 has shown a noticeable decline in the amount of acquisitions in the UK by foreign companies and buys in the UK by other UK firms.

However, Andrew Kerr, corporate partner at law firm Pincent Masons, believes that activity is likely to pick up, particularly on an international basis.

Kerr adds, ‘Companies with strong balance sheets and cash resources are continuing to make strategic acquisitions, and many of these are in overseas markets where there is greater perceived values.

‘We have seen an increase in activity in certain sectors, for example, financial services and technology over the last few months.’

Kerr says that Japanese buyers are increasingly looking at opportunities in Europe as a result of a strong Yen.

Speaking to GrowthBusiness, Peter Watson, director of corporate finance at Prism Corporate Broking, says that it is no real surprise that activity levels remain depressed overall given the continued economic uncertainty but is reassured by the improvement over the first quarter of 2012.

He adds, ‘We expect this slow recovery to continue – certainly there are positive signs that MBO’s are now back on the banks’ agenda.’

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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