Financial Planning

US M&A deals for UK companies slow down

By Deloitte
Financial Planning
Published: 13 February 2018

US buyers acquired 156 UK companies in the second half of 2017, down 13.8% on the 181 deals done in the second half of 2016. However, interest remained strong from UK buyers in the other direction, with the UK acquiring 109 US companies in the second half of 2017, up 23.9% on the 88 deals done in H2 2016. This trend is reflected over the full year, with US acquisitions in the UK down 11.3% but up 21.3% for UK acquirers over in the States.

The value of disclosed M&A deals between the US and the UK reached US $36.9 billion in the second half of 2017. This was made up of $23.3 billion of deals from US buyers here and $13.6 billion from UK buyers in the US, all according to the latest US/UK M&A Deal Monitor from Deloitte, published today.

Cahal Dowds, vice-chairman of Deloitte UK, comments: “US dealmakers are pausing for breath on UK acquisitions as tax laws take effect there and they observe the progress of Brexit over here. This means the world’s largest bilateral deal corridor by value is still intact, but the activity is shifting over to UK acquirers buying in the States. UK buyers clearly see the US as the place with growth potential, favouring it over China and India.

“Given the relative size of the economies (with the US alone being six times bigger than the UK) the interest from UK acquirers is significant and I would expect activity to continue in both directions. Despite a short term pause from US acquirers, the fundamentals remain in place.

“In a low interest rate environment there are still vast amounts of corporate cash reserves and funds from private equity to be deployed. January produced a very strong month for M&A globally but market volatility has returned to the stock market after a long period of steady growth. Time will tell if this is a widely anticipated correction, or a cause for alarm.”

By sector TMT remains by far the strongest by volume, with 68 deals into the UK from US buyers and 38 from the UK to the US in the second half of last year.

Cahal Dowds concludes: “Driving activity is the need for companies to capture the benefits of new data technology capability by acquiring it. The continuing need for businesses to move their operations onto digital platforms and to acquire and manage customer data is proving much stronger and more durable than short term cycles of activity when it comes to driving M&A. If you have a technology need in your product lines, then today is a great opportunity to find a company that can solve that. Developments in big data, alongside a virtually unlimited data storage capacity, have both impacted the M&A markets.

“There remains high confidence in the global M&A market, but it is getting harder to ‘buy well.’ With fierce competition driving high valuations, for many M&A is no longer second best to organic growth, but a primary growth strategy.”