US deal makers deliver a vote of confidence in UK M&A
31 January 2017
The last six months of M&A activity across the US/UK M&A corridor reached $126 billion as the US remains confident in buying UK assets.
The Deloitte US/UK M&A Deal Monitor identified that US outbound deals to the UK rose 3.6% in the last six months, while UK outbound deals to the US fell by 20.4%. However, the final quarter of 2016 saw UK outbound M&A leap to $86.4 billion in value, ensuring the US/UK deal corridor performed roughly in line with the global trend for M&A.
Cahal Dowds, partner and vice-chairman of Deloitte UK, comments: “Two trends stand out in the second half of 2016, the strength of US outbound dealmaking and the sharp fall in UK outbound dealmaking. Widespread expectations of a collapse in US outbound dealmaking following the UK’s vote to leave the EU has not come to pass. On the contrary, US buying of UK assets has outperformed the previous six months.”
A total of 254 deals across the corridor were recorded in the Deal Monitor in the six months ending December 2016. 172 US outbound compared to 82 UK outbound. US outbound M&A was concentrated on London, but regional deals continue to grow securing 97 deals in the last six months.
Pauline Biddle, UK Midlands practice senior partner, comments on the regional trends: “As expected, there has been a high concentration of M&A deals in London. Regionally, patterns have mirrored the industrial and commercial demographic of the UK. That means more industrial companies in the West Midlands, more technology in the East Midlands and East, and more services in the South East. The East of England’s high-tech companies are increasingly attracting deals, having secured 30 inbound deals last year.”
TMT still leads with 37% of M&A deals, but manufacturing deals are up 9.5% on the previous year. US outbound manufacturing deals rose to 45 in 2016, with the deal rate rising 45% in the last six months. UK outbound manufacturing deals recorded a 36% fall in the same period. The migration of technology into all business sectors is helping to create a new generation of deals in manufacturing. Deloitte’s analysis show that manufacturing is increasingly incorporating TMT, and vice versa.
"Companies everywhere are being tested on their ability to deal with technology convergence,” adds Dowds. “If you have a technology need in your product lines, then today there is a great opportunity to go out and find a company that can solve that. If you are not investing in those solutions organically then you have to buy those solutions, and quickly. This is going to create a lot of future dealmaking".
Dowds concludes: “With record levels of cash on companies’ balance sheets combined with significant funds raised by private equity, investor appetite remains strong. The US is looking beyond uncertainty as the fundamentals of M&A have seldom been stronger. In this low economic growth environment, a key way to get increased revenue is to buy it. The quest for growth continues.”
Notes to editors
Methodology: Data in the Deloitte M&A Deal Monitor are based on deal volumes and values in Thomson One Banker and Deloitte analysis. Note, deal value calculations are based on M&A deals for which value is disclosed - deal values are not disclosed for a significant proportion of M&A deals.
All value and volume calculations are based on announced deals which may not be completed; value calculations are based on deals for which value is disclosed, while volume calculations are based on all announced deals whether or not value is disclosed.
The Deal Monitor includes volume and value data for the most recent eight quarters; in this edition data run from Q1 2015 to Q4 2016 inclusive. These findings are taken from the third edition of the “Deloitte US/UK M&A Deal Monitor” report, which is available from Deloitte.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.