Low prices and currency weakness encourage bargain hunters in UK M&A

Despite current economic uncertainty, low prices and currency weakness are encouraging buyers looking for value in UK M&A.

Today's report from the Office of National Statistics shows that the value of inward M&A (foreign companies acquiring UK companies) rose to £18.4bn in Q2, an increase on the £7.6bn registered in the first quarter and £7.1bn in the same quarter last year. In total, there were 126 completed inward acquisitions in Q2, a slight fall on the 129 reported in Q1.

The value of domestic M&A in Q2 also rose to £2.8bn, £1.0bn higher than in the previous quarter, despite deal volumes falling to 188 completions, 46 fewer than in the first quarter. However, deal volumes remained broadly consistent with the numbers recorded during the first three quarters of 2018.

There were 48 completed outward M&A deals (UK companies acquiring foreign companies abroad) in Q2, 29 fewer than in the previous quarter and 26 less than quarter 2 in 2018. The values of outward M&A also fell to £1.5bn in Q2, a £4.6bn decrease on the previous quarter and a £1.2bn decrease on the same quarter last year.

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

'There is not a great deal that's surprising about today's report.  Given the persistent weakness of sterling overseas acquisition by UK companies is challenging whereas inbound investment from abroad is, despite some of the obvious uncertainties for the UK economy, encouraged by the relatively low multiples in the UK particularly when sterling weakness is taken into account.

'Meanwhile UK domestic activity is relatively strong as consolidation is more attractive than new investment, which has been weak.

'In the absence of any change in Q3 we would expect these trends to continue for the rest of the year, absent a chaotic "Halloween" Brexit.'