Partner Piece – Blake Morgan

May 24, 2018

This month, Bruce Potter, from Blake Morgan provides his expert guide on M&A activity and trends we are likely to see in the future.

 

Q1 2018 has seen the UK’s strongest M&A activity for a first quarter since Q1 2007

UK M&A deal value for Q1 2018 doubled that of Q4, according to data obtained by a recent EY report.

The data stated a total value of c$120bn in Q1 2018, up from c$51bn in Q4 2017. The Telecoms sector reported the highest level of activity, closely followed by the automotive and healthcare sectors.

The figures show that for Q1 2018:

  • UK domestic deals were valued c$32bn (up from $27bn in Q4 2017).
  • Outbound transactions totalled c$21bn (up from $12 in Q4 2017).
  • Inbound M&A transactions were in total c$67bn (up from $11bn in Q4 2017).

What does this mean for future M&A trends?

Looking at inbound activity, US investors were those most active in the UK’s M&A market (with $60bn worth of deals) followed by France, Switzerland, Japan and the Netherlands.

The UK’s outward M&A activity was highest in Switzerland with the US being second and Germany, Oman and France following up.

Given that sterling is still trading at a deep discount to where it was prior to the Brexit referendum (making inward investment into the UK attractive to those outside of the UK) combined with favourable interest rates, 2018 Q2 M&A activity is likely to remain positive – at least until interest rates rise.

Future proofing business models also seems to be driving UK M&A activity with companies and groups looking to reshape by acquiring key technology and data assets, which is a trend likely to continue to shape the UK M&A market and grow in preparation for Brexit. It is worth noting that we have already seen moves to increase scrutiny sales of key technologies by the CMA around the legislation proposed on 15 March 2018 that lowered the threshold for competition enquiries to £1m for some new technologies.

Changes to US tax law is also likely to strongly effect the UK M&A market as US companies look to realign themselves by reviewing their deployment of capital both in and out of the US.

Commentators believe that UK regulators are likely to adopt a more protectionist view over inbound M&A, resulting in them looking more closely at the purposes being individual transactions.

However, given that the UK is, along with the US, one of the most open jurisdictions for inbound investors, it highly unlikely that UK is going to let protectionism get in the way of a good deal.

 

Bruce Potter

https://www.blakemorgan.co.uk/our-people/bruce-potter/

quote marks icon

Testimonials