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Perspectives

US/UK M&A deal monitor

Technology remains the driving force in mergers and acquisitions

This edition of the deal monitor includes a special focus on the role of technology in driving M&A deals. The technology sector has been the busiest M&A sector in each of the last eight quarters, but the impact of technological change is seen in other sectors as well—financial services, business services, consumer business, and manufacturing are all being profoundly reshaped by new data and communications technology.

Fourth edition of the Deloitte US/UK M&A deal monitor

The Deloitte US/UK M&A deal monitor follows trends and analyzes underlying driving forces in the most active merger and acquisition arena in the world economy today. In our fourth edition, we focus on the latest half year of M&A activity (January 2017 to June 2017) between the United States and the United Kingdom, set in the context of the most recent eight quarters in the US/UK “corridor.”

The level of M&A deal flow between the United Kingdom and North America means this is still the biggest bilateral deal corridor in the world by volume. However, for the first time in eight quarters, divergent expectations for the near to medium term are emerging. There remains a high degree of confidence that the wider M&A market will remain strong over the next half year, due to high structural demand and supportive financial conditions. However, data shows that US dealmaking into the United Kingdom has taken a step down.

Key themes

  • US dealmaking into the United Kingdom has fallen by almost 15 percent in H1 2017, with several dealmakers pointing to the Brexit effect.
  • UK dealmaking into the United States has risen by almost 10 percent in H1 2017, with UK investors keen to secure revenue growth in the United States.
  • Confidence over M&A volumes is high in the United States, but more guarded in the United Kingdom.
  • Technology sector deals continue to provide most of the volume in the corridor, with companies attempting to capture opportunities in big data and growth in cloud-based services.
  • California, New York, and London remain primary locations for transatlantic dealmakers, but US buyer interest in the UK regions outside London is growing.
  • Private equity share of deals versus corporates is falling.
US and UK flag

Why technology is the driving force

“The transatlantic deal flow dynamic is a material feature of the technology M&A landscape,” says Paul Staples, head of Technology, Media & Telecommunications EMEA Advisory.

The UK marketplace remains of strategic interest to US companies as they search for innovative and successful business models that offer attractive future scalability. We have also witnessed a surge in interest from specialist US private equity funds, sometimes attracted by an opportunity to acquire a platform within a higher growth niche market.

There have been few telecoms deals in the last year (and no UK outgoing telecoms deals at all). Media acquisitions are part of the bilateral deal flow, but technology clearly dominates.

“Within the larger cap market, it is clear that ongoing political and regulatory scrutiny will continue to have a dampening effect on transaction volumes within the European telecoms section,” says Paul Staples. “By comparison, it is interesting to note the progress being made by the proposed merger between AT&T and Time Warner on the other side of the Atlantic.”

Technology remains the biggest part of the technology, media, and telecommunications dealmaking channel, and it is the channel where US buyers typically call the shots. “We continue to feel the weight of US capital when it comes to the consolidation dynamic that is playing out in meaningful segments of the tech sector. Although it is worth noting that Asian acquirers have also made their presence felt and have shown genuine ambition, reflected in their increased weighing in recent years in terms of outbound M&A sector volumes,” says Paul Staples. “We were potentially seeing a reprise of the trend previously witnessed within the software and IT services sector, where successful UK companies were progressively absorbed over an extended period by overseas international groups.”

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US/UK cross-border M&A deals

  • Source: Thomson One Banker

US/UK deal volume and value by industry Q3 2015-Q2 2017

  • Source: Thomson One Banker

Corporate and private equity deals by volume

  • Source: Thomson One Banker
N.B Deal value calculations are based on M&A deals for which value is disclosed – values are not disclosed for a significant proportion of M&A deals. Volume calculations are based on all announced deals whether or not value is disclosed.

US outbound deal volume by UK regions since Q3 2015

UK outbound
London
201
South East
71
North West
21
East
20
Scotland
16
South West
16
East Midlands
6
Yorkshire & The Humber
6
West Midlands
5
Wales
2
North East
1
Northern Ireland
1
Offshore
1
Others
50
US outbound
London
200
South East
115
East
55
North West
38
East Midlands
30
South West
20
West Midlands
28
Scotland
25
Yorkshire & The Humber
23
Wales
14
North East
6
Northern Ireland
6
Offshore
1
Others
117
  • Source: Thomson One Banker

UK outbound deal volume by US States since Q3 2015

US outbound
New York
149
California
117
Illinois
45
Texas
37
Massachusetts
34
Connecticut
27
Georgia
25
Florida
24
New Jersey
24
Colorado
21
Others
183
UK otbound
California
78
New York
63
Texas
32
Massachusetts
22
Delaware
19
Florida
18
New Jersey
18
Illinois
15
Georgia
13
Pennsylvania
13
Others
126
  • Source: Thomson One Banker
N.B Deal value calculations are based on M&A deals for which value is disclosed – values are not disclosed for a significant proportion of M&A deals. Volume calculations are based on all announced deals whether or not value is disclosed.
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