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Just released! Latest M&A Statistics…

The UK Office for National Statistics have just released their latest data for 2019:

HEADLINES

  • In Quarter 2 (Apr to June) 2019 the estimates for the values of both inward and domestic mergers and acquisitions (M&A) involving UK companies saw notable increases, while outward M&A saw a notable decrease when compared with Quarter 1 (Jan to Mar) 2019.
  • The value of inward M&A (foreign companies abroad acquiring UK companies) was £18.4 billion in Quarter 2 2019, a sizeable increase of £10.8 billion on the £7.6 billion recorded in Quarter 1 2019.
  • The value of domestic M&A (UK companies acquiring other UK companies) in Quarter 2 2019 was £2.8 billion, a £1.0 billion increase on the value recorded in Quarter 1 2019 (£1.8 billion).
  • The value of outward M&A (UK companies acquiring foreign companies abroad) was £1.5 billion in Quarter 2 2019, a notable fall of £4.6 billion compared with £6.1 billion during Quarter 1 2019.

The value of inward M&A increased in Quarter 2 2019

Value of inward M&A transactions involving UK companies Q1 2015 to Q2 2019

The estimates for the value of mergers and acquisitions (M&A) of UK companies made by foreign companies during Quarter 2 (Apr to June) 2019 saw a sizeable increase when compared with Quarter 1 (Jan to Mar) 2019. The latest estimates also show a notable increase in the value of inward M&A when compared with Quarter 2 2018.

The value of inward M&A in Quarter 2 2019 was £18.4 billion, the highest since Quarter 4 2018 (£38.8 billion). Between Quarter 1 and Quarter 2 2019 the value of completed inward M&A increased from £7.6 billion to £18.4 billion, a notable increase of £10.8 billion. This increase is largely explained by one sizeable acquisition involving Marsh & McLennan of the USA which acquired Jardine Lloyd Thompson Group of the UK. When comparing the latest estimates with the same quarter a year ago (Quarter 2 2018) the value of inward M&A has increased by £11.2 billion (from £7.1 billion to £18.4 billion).

There were 126 completed inward acquisitions in Quarter 2 2019, a slight fall on the 129 reported in the previous quarter.

The value of domestic M&A in Quarter 2 2019 increased

Value of domestic M&A transactions involving UK companies Q1 2015 - Q2 2019

During Quarter 2 2019 the estimates for domestic M&A (UK companies acquiring other UK companies) showed a notable increase in the value of completed deals when compared with Quarter 1 2019.

The value of domestic M&A in Quarter 2 2019 (£2.8bn) was £1.0 billion higher than the £1.8 billion recorded in Quarter 1 2019 and is in line with the £3.0 billion seen in Quarter 3 (July to Sept) 2018. This increase is largely explained by one high-valued acquisition by Ensco PLC which acquired Rowan Companies PLC of the UK.

There were 188 completed domestic acquisitions involving a change in majority share ownership in Quarter 2 2019, a decline of 46 deals on those recorded in the previous quarter (Quarter 1 2019). However, the number of domestic acquisitions in Quarter 2 2019 is consistent with the numbers recorded in the first three quarters of 2018.

The value of outward M&A decreased in Quarter 2 2019

Value of outward M&A transactions involving UK companies Q1 2015 to Q2 2019

The latest estimates for the value and number of mergers and acquisitions (M&A) of foreign companies made by UK companies during Quarter 2 2019 showed sizeable decreases when compared with the previous quarter. Similarly, comparing Quarter 2 2019 with Quarter 2 2018 also shows that the number of completed outward M&A was lower.

The value of outward M&A in Quarter 2 2019 was £1.5 billion. This was a £4.6 billion decrease on the previous quarter (£6.1 billion) and a £1.2 billion decrease on the Q2 2018 value (£2.7 billion). The sizeable decline in value during Quarter 2 2019 can be explained by fewer completed acquisitions with values in excess of £100 million.

There were 48 completed outward M&A deals during Quarter 2 2019, similar in number to Quarter 3 (July to Sept) 2017 when 47 acquisitions were recorded. The latest estimates for the number of outward M&A during Quarter 2 2019 saw 29 fewer acquisitions than in the previous quarter (77) and 26 less than Quarter 2 2018 (74).

A few notable outward acquisitions which completed during Quarter 2 2019 were Smith and Nephew PLC of the UK which acquired Osiris Therapeutics Inc. of the USA and Soco International PLC of the UK which acquired Merlon Petroleum EL Fayum Company of the Cayman Islands.

There were 13 outward disposals that completed during Quarter 2 2019, worth a total of £0.6 billion. This was a notable decrease of £0.8 billion when compared with the £1.4 billion recorded in the previous quarter. Quarter 2 2019 saw the lowest value of outward disposals (£0.6 billion) since Quarter 4 2017, when the value reported at that time was £0.5 billion.

Note: A new method for compiling M&A statistics was introduced from Quarter 1 2018. This new methodology may lead to a structural break in all M&A statistical time series, more information.

We must also be mindful of contextual external evidence in relation to this data. Global M&A activity can be driven by the availability of credit. Therefore, when credit conditions deteriorate, as happened in the 2008 to 2009 economic downturn, M&A activity declines. M&A activity can also be affected by the economic outlook and company profits, in addition to a range of other economic factors. The process of completing an M&A transaction takes time and sometimes there may be a lag between improving economic conditions and any change in M&A activity. Therefore, it is important to consider the M&A data within the wider economic context such as in the following Bank of England report:

Credit Conditions Survey Quarter 2 2019 reported that “Lenders reported a decrease in demand for corporate lending from small businesses, a slight decrease in demand from large private non-financial corporations (PNFCs) and no change in demand from medium sized PNFCs in Quarter 2 2019. Lenders expected demand for corporate lending in Quarter 3 2019 to remain unchanged for small and medium-sized businesses, and to decrease slightly for large PNFCs”.

The Agents Summary of Business Conditions report for Quarter 2 2019 reported that “Ongoing uncertainty about Brexit dampened appetite for investment in the UK, leading to weaker demand for professional services associated with such investment, for example banking, legal and real estate. Contacts also reported a recent easing in demand for consultancy services, to help with contingency planning, for example”. The same report stated that “Investment intentions weakened, as Brexit-related uncertainty weighed on sentiment, particularly among exporters. Subdued demand for credit reflected weak investment intentions resulting from uncertainty about the economic outlook. In addition, many large companies said they had refinanced some existing loans early to avoid any Brexit-related volatility around the end of March. Contacts generally reported that credit continued to be readily available. However, there were some reports that banks’ appetite to lend to certain sectors had decreased. For example, contacts reported a slight reduction in the availability of credit for care home operators, store-based retailers and higher education establishments”.

The Inflation Report for May 2019 stated that “Business investment fell by 0.9% in Q4, the fourth consecutive quarter of decline. As noted in the February Report, business investment has been weak since the referendum, but that weakness has intensified since the middle of last year”. This same report stated that “Brexit-related uncertainty has led to a reduction in business investment and an increase in stock building”.

*All information taken from Office for National Statistics report