US-UK M&A deal activity holds despite uncertainty and a global M&A slowdown

US corporates and private equity houses announced 168 deals into the UK, during the first half of this year, equal to the 168 deals for the same period last year. Going the other way UK acquirers announced 99 deals in the US, which is 32% higher than 75 deals announced for the first half of last year, according to analysis from Deloitte.

In terms of value, US acquirers announced $15.4bn worth of deals in the UK, compared to $18.4bn for the same period last year. Meanwhile UK acquirers announced $4.5bn worth of deals in the US, which is less than half of 2015 H1 total of $9.2bn.

Cahal Dowds, vice-chairman of Deloitte commented: “In the first half of this year, appetite for US-UK held acquisitions persisted, despite a global slowdown in M&A. Furthermore, deal volumes are a more reliable indicator than values, which are not always disclosed. This means as individual countries, the US-UK ‘deal corridor’ is most active by volume.

“Of course the real test will be if deal processes slow down over the next six months. However, large reserves of undeployed capital and an increasing ‘comfort level’ for US investors operating abroad are two positive factors that should remain in place. By sector, TMT remains the largest by volume in both directions, hence the London-California axis has now overtaken the London-New York one.”

Following a record year in 2015, global M&A slowed for the first half of this year, down 32% in terms of deal values, and 15% by volume.

Iain Macmillan, global head of M&A at Deloitte, commented: “M&A activity is built on long-term decisions and, despite recent political shocks, we continue to see many deals moving ahead. However, there is currently a level of sensible reflection on some M&A transactions and this may cause processes to elongate. Furthermore, global M&A activity was always likely to see a period of introspection as new owners look to capture the synergies and deliver returns from last year’s record deals. Historically, we have seen that once uncertainty dissipates, M&A activity recovers quickly.”

Regarding financing for M&A deals, alternative ‘non-bank’ lenders have raised a record amount of capital in the past eighteen months, nearly $40bn worth of funds in Europe and the US.

Fenton Burgin, Head of UK Debt Advisory at Deloitte, concluded: ”Overall, the greatest fears from the Referendum vote have not yet come to pass. There has been no spike in the interbank lending rates, nor a shutdown in the corporate financing markets. Indeed Brexit is likely to accelerate the shift to alternative lending as costs of funds for UK-centred banks are likely to rise, and this deal corridor should survive.”

End

Notes to editors

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