M&A investment into the UK down 42%, but is up 107% for the rest of Europe during the first quarter of 2016

Inbound UK M&A deal values decreased by 42% from US$51.4bn in Q1 2015 to $30bn in Q1 2016. However during the same period in the rest of Europe, M&A investment increased from $35.6bn to $73.5bn, according to analysis from Deloitte. A similar trend emerges by deal volumes, where the number of UK-targeted deals fell 10% to 222 in the first quarter, while for the rest of Europe inbound deal volumes increased by 4% to 384 deals.

Iain Macmillan, head of global M&A at Deloitte, commented: “The UK was the strongest performer last year and received $326bn worth of M&A investment, the highest for any country in Europe. However, the global economic slowdown, compounded by uncertainties created by the EU referendum vote, has had a massive impact on deal flows into UK, with investment dropping to $30bn in the first quarter of this year”.

Analysis shows the biggest drop in M&A investment was in the UK’s manufacturing sector, where deal values fell by 93%, followed by the professional services sector, where it fell by 85%. However, deal values in the energy & resources sector rose largely due to ongoing consolidation here.

Deloitte also analysed deal activity during other times of uncertainties and found in the months preceding the Scottish referendum that deal value in UK slowed by 45% and as the outcome of the referendum was looking increasingly uncertain. In sharp contrast during the 2015 UK general elections, deal activity continued unabated and in fact increased by 71%. Then the polls were predicting a particular outcome for the general election, which even though it proved to be wrong, did provide a greater degree of certainty and hence had a positive impact on deal flows.

Iain Macmillan concluded: “Our analysis shows that market uncertainties have a significant bearing on corporate confidence and the deal flow. Currently, companies are content to wait and will revaluate their plans following the outcome of the referendum vote. The credit conditions are still favourable and the UK market has always been one of the most active in Europe, so we expect deal flow to eventually pick up once the corporate indecision abates.”

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