Value of UK acquisitions by overseas buyers soars

The value of purchases of UK companies by foreign businesses climbed to £23.4 billion during the second quarter of the year, new statistics reveal.

Quarterly results from the Office for National Statistics (ONS) shows that, compared with the first three months of the year, inward acquisitions were up from £3.5 billion to £23.4 billion and from 38 to 60.

However, much of this rise can be attributed to the acquisition of Xstrata by Glencore International.

The results for inward deals come as the total number of domestic and cross-border M&A activity shrank by 42 per cent when compared with findings from the same period in 2012.

The fall recorded by ONS can be attributed to a decline in the amount of domestic activity. In the second quarter of 2013, UK deals reached £2.1 billion (a fall of £700 million).

M&A Transactions Q1

Source: Office for National Statistics

Peter Watson, director of corporate finance at Prism Corporate Broking, tells GrowthBusiness that M&A levels are still well below pre-credit crunch levels and he believes that this remains a result of the weakness in the banks and restriction on cash flow lending.

‘These structural problems tend to restrict deals to those where cash sums or credit lines are available, and transactions which are more difficult to finance such as MBOs remain a relative rarity,’ he adds.

‘That said, the interest being shown by private equity is growing, and we are aware of some significant fundraising (e.g. Synova Capital) which bodes well for the future.’

More on UK M&A statistics:

The ONS also finds that the value and number of transactions abroad by UK companies is at the lowest levels seen since the organisation began collecting quarterly data in 1987.

On the inbound front, there were three acquisitions involving American-owned businesses with values of over £100 million, a situation which the ONS says upholds the view that the US continues to be seen as a ‘prime inward investor’ acquiring majority share interests in UK companies.

Jon Hughes, head of EY’s transactions advisory services practice in UK & Ireland, comments, ‘From the ONS data, it is clear that UK companies are engaging in fewer overseas M&A transactions with the on-going uncertainty in the Eurozone and emerging markets leading to UK corporates to adopt a far more cautious strategy to oversees acquisitions.

‘Both the number and value deals have declined significantly when compared to the previous quarter’s activity and over the same period last year. Although there are undoubtedly attractive assets in these markets, UK businesses continue to err on the side of caution, waiting for conditions to improve before making their first move.’

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.

Related Topics

Overseas buyers