Domestic and inward M&A cools as overseas activity heats up

Today's report from the Office of National Statistics shows that while the value of outward M&A (UK companies acquiring foreign companies) recorded a notable increase in Q3, the value of inward and domestic M&A deals fell amid persistent Brexit uncertainty.

During quarter 3, the value of outward M&A was £7.5bn, a £5.9bn increase on the previous quarter and £3bn above the same quarter last year. However, deal numbers remained broadly flat compared to the previous quarter. The quarterly total was boosted by the completion of Vodafone's acquisition of Liberty Global's operations in Germany, the Czech Republic, Hungary and Romania. 

By contrast, the value of inward M&A fell sharply, down by £8.5bn from the previous quarter to £10.1bn as fewer large acquisitions completed during the period. Notable exceptions included Boston Scientific Corporation's acquisition of BTG Group and EBRO Foods SA of Spain which acquired Tilda Ltd.

The number of domestic M&A deals fell for the third consecutive quarter to 192 deals, reaching their lowest level since Q4 of 2017. The value of domestic M&A in Q3 was £1.5bn, £1.3bn lower than in Q2 and £1.5bn lower than in the same period last year.

Commenting on the results, Rob Donaldson, RSM's head of corporate finance said: 

'As the weather turns colder so does the climate for UK M&A activity. In Q3 both inward and domestic M&A activity fell by almost 50 per cent when compared to Q2 and for domestic M&A last year. That's not surprising given the continuing chilling effect of Brexit and now political uncertainty caused by the General Election. There is little reason to expect an early thaw, even if the Conservative Government wins a renewed majority and manages to pass the exit arrangement there then remains the almost impossibly tight deadline to negotiate a new trading relationship with our largest trading partner by next Christmas. 

'We expect the climate for M&A activity in the UK to remain frosty. Outbound M&A, the one bright spot in these statistics only serves to highlight the relative attractiveness of more stable jurisdictions to invest in. It's ironic that as we fight to exit from the EU, UK PLC is working hard to invest abroad, and substantially into the EU.'