Every year, more and more UK company owners are engaging in cross border M&A to take advantage of high multiples, favourable deal structures and ever-increasing growth prospects.
Amidst a competitive market where UK companies are in high demand, deals involving overseas buyers are becoming increasingly common, ensuring that the UK maintains its status as the third largest M&A market (after the US and China), and one of the globe’s most popular destinations for cross border M&A.
With a weaker pound in the wake of 2016’s EU Referendum, UK products have been more competitively priced in the international marketplace. This factor, combined with strong balance sheets and world-class capabilities, has in turn, made UK companies increasingly attractive to overseas buyers looking to profit from exporting goods.
The current overseas interest in UK companies is reflected in recent industry statistics. According to company deals database, Zephyr, over 3,200 deals involving UK target companies and overseas buyers took place between the years of 2014 and 2016, accounting for almost 20% of all UK M&A deals during this time and 2017 certainly followed suit.
The past few years have also been significant in terms of value. Zephyr reports that overseas buyers accounted for over £207bn worth of disclosed deal values generated during 2016 alone, representing a staggering increase of almost 340% on the deal values witnessed just two years prior. According to the OECD, the deal values observed during 2016 represented the highest level of foreign investment into the UK in over ten years, dating all the way back to 2005.
These high values can be seen clearly across the entire UK M&A landscape, with thanks to a high volume of cross border mega deals, including the £79bn acquisition of UK beer manufacturer SABMiller by Belgium-based brewing company Anheuser-Busch InBev, which represented the largest ever deal in the beer industry, and Japanese tech firm Softbank’s £24bn takeover of ARM Holdings.
Industry statistics indicate that cross border transactions have maintained a strong presence within the UK market since 2007, the original ‘golden year’ of global M&A. Zephyr reports that between 2007 and 2016, deals involving overseas buyers accounted for 30% of all UK acquisitions.
The acquisitive nature of overseas buyers and consistent deal volumes suggest “confidence in the economy”, according to Maria Borga, senior statistician at the OECD’s investment division. Whilst she said that the fall in the value of sterling was likely to have been a factor driving the increase in investment, Maria stated that the UK’s underlying appeal also played a role.
A string of global companies and international high net worth individuals have announced plans to expand into the UK. Investors from the Middle East recently said they would invest an additional £5bn into UK infrastructure, having already secured ownership of significant volumes of London property.
With all of this in mind, the future of the UK M&A industry looks bright. Having experienced a particularly successful few years in terms of inward investment, momentum is forecasted to continue well into 2018 and beyond, and with UK companies remaining highly attractive to acquirers located across the globe, we fully expect to observe great success in the coming years.