Domestic M&A values reach decade high

New figures from the Office of National Statistics have revealed that domestic M&A values have reached their highest level for 10 years.

The total value of domestic M&A (UK companies acquiring other UK companies) during 2018 was £26.5bn, the highest value recorded since 2008 when deal values reached £36.5bn.

The value of inward mergers and acquisitions (acquisitions in the UK by foreign companies) increased from £35.2bn in 2017 to £71.1bn in 2018, due mainly to Comcast Corporation's acquisition of Sky PLC in a deal worth just over £30bn.

However, the value of outward acquisitions (acquisitions by UK companies abroad) fell from £77.5bn in 2017 to £22.7bn in 2018, largely because of the absence of high value deals.

Rob Donaldson, RSM's head of corporate finance said:

'Despite all the Brexit uncertainty, the UK M&A market has had a pretty good year, driven in part by high domestic demand as well as continued interest from overseas buyers. 

'Favourable exchange rates have made UK assets very attractive to overseas buyers. We have also seen sustained interest from the private equity market, keen to make decent returns in a low interest rate environment. 

'This recent flow of capital in private equity (PE) has led to PE houses holding a lot of dry powder. Given the pressure they are under to deploy their funds, there has been stiff competition for UK assets and high valuations for some deals.

'This in turn has provided attractive opportunities for UK businesses seeking investment. Middle market businesses are now more open to private equity investment as a means of driving long term sustainable growth although there remains a lack of understanding of how PE deals are constructed.'  

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