UK inbound M&A values hit seven-year high

M&A PuzzleUK companies are attracting strong interest from overseas buyers with M&A deal values reaching $39.7 billion (€37 billion) for the first quarter, the highest figure since 2008, according to analysis from Deloitte. This is up 63% on the fourth quarter of 2014, when inbound deal values stood at $24.4 billion (€22.7 billion). The rise is driven by a surge in acquisitions from North American and Asian companies.

Iain Macmillan, Head of M&A at Deloitte, commented: “Foreign buyers continue to find UK assets attractive and are confident about the economic recovery. This is underlined by recent deals in the telecommunications and manufacturing sectors, amongst others. In addition, the US dollar has risen by 14% against sterling since last July, substantially boosting US corporate spending power here.”

However, in the first quarter of 2015 outbound UK deal values more than halved compared to the fourth quarter of 2014, while domestic deal making values were also down.

Macmillan added: “This confidence from abroad contrasts with attitudes at home, where UK businesses seem willing to sell but not necessarily to acquire. Outbound UK deal values are down, while domestic deal making values were also subdued. It seems the uncertainties surrounding UK elections may have had a temporary impact on the pick-up in deal momentum.”

Financing conditions remain overwhelmingly positive for large corporates. Deloitte’s CFO survey reports that the cost of credit has hit a seven-year low, while availability of credit remains close to a seven-year high in the first quarter of 2015. In addition, 61% of the UK’s CFOs believe now is a good time to issue equity.

Chris Nicholls, Head of equity capital markets at Deloitte added: “Both equity and debt markets remain highly supportive of M&A transactions, large and small. Rising equity markets have seen record amounts of acquisition-linked financing and market appetite for underwriting major transactions. This combination means corporates looking to fund M&A in many sectors ‘have never had it so good’.”

Inbound acquisitions into Europe are growing at the fastest pace in a decade, and six out of the top ten deals announced in 2015 were from non-European acquirers. Globally, $644.9 billion (€600 billion) worth of deals have been announced in first quarter of 2015, surpassing the US $563.4 billion (€525 billion) announced in first quarter of last year.