UK M&A drops four quarters in a row

03 April 2012 – 

The quarterly number of mergers and acquisitions (M&A) involving British targets has seen its fourth consecutive fall, dropping to its lowest level since the 90s, according to research analysed by Grant Thornton. Only the number of private equity deals remained steady, while the value of UK acquisitions abroad dropped by more than half compared to Q1 2011.

478 M&A deals worth £17.1 billion* were announced in the UK in Q1 2012. Both the number and total value of deals are 11% below the previous quarter (Q4 2011: 535 deals worth £19.3 billion).

Since Q1 2011 (when 685 deals worth £26 billion were recorded) the number of announced deals has fallen every quarter marking a total drop of 30%.

"The total value of UK M&A in the first three months of this year amounts to about two thirds of the value recorded in the first quarter of 2011, while the number of deals has reached the lowest level since the 90s," commented Stephen Baker, Corporate Finance Partner at Grant Thornton UK LLP.

"There was a noticeable drop in business confidence in the latter part of 2011 which has led to more cautious deal activity in the year to date."

Slow down in cross border M&A

The latest statistics also indicate that cross border activity has slowed down this year.

Foreign bidders announced 162 M&A deals in the UK with a total value of £12.2 billion in Q1 2012, representing a 12% drop in the number of such deals compared to Q4 2011, while the value is only 2% lower. Since 2009, the annual number and value of foreign inbound deals has been steadily increasing.

"In recent months, UK companies have also reduced their M&A activity abroad, with the total value of such foreign acquisitions dropping by more than half compared to Q1 2011. It is too early to call the end of the positive trend which saw the annual value of UK acquisitions abroad steadily increase since 2009," said Baker.

There has been a 20% drop in the number and value of UK M&A bids for foreign assets to 190 deals with a total value of £10.2 billion (Q4 2011: 237 deals worth £12.9 billion). By comparison, UK firms announced 260 outbound M&A deals worth £21.4 billion in the same period last year.

Private equity and technology deals remain steady

The number of deals backed by private equity has remained steady in the last four quarters, with 77 private equity deals valued at £3.4 billion being recorded in the first three months of the year.

"At least the UK technology sector has seen a consistent increase in M&A activity since 2009. Technology firms in the UK will continue to attract private equity bidders in the coming months," continued Baker.

"Attractive targets cover a diverse range of products. In Q1, Grant Thornton advised the shareholders of MILMEGA Limited on the sale of the company to Teseq AG, a Swiss supplier of electromagnetic compatibility (EMC) systems. The deal was backed by private equity investors, including Aventic Partners AG, alongside facilities from UBS. MILMEGA is based on the Isle of Wight and engaged in the design and manufacture of high power microwave and radio frequency amplifiers for EMC testing."

"Hi tech products for hospitals continue to be an attractive niche. This year, Grant Thornton also advised on the sale of JAOtech, a UK-based manufacturer of patient entertainment and point-of-care terminals for hospitals, to Barco, the Belgian technology company listed on NYSE Euronext. JAOtech employs about 50 staff and realised sales of about €19 million in 2011. Over 55,000 JAOtech systems have been installed in over 200 hospitals worldwide in partnership with approved technology partners."


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Notes to editors:

*Deal numbers and values are non-seasonally adjusted and based on announced deals, which offer the most current view of the M&A market (although not all of these deals will be finalised). Grant Thornton Corporate Finance analysed Thomson Reuters data on 29 March 2012.

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