Merger activity set to rev up a gear in 2018, says report

● Strong first quarter saw deal action total £ 87bn covering 680 transactions

UK mergers and acquisitions (M& A) activity is set to step up a gear over the next year, fuelled by confidence in glo - bal growth, a new report out today forecasts.

Nearly two- thirds of UK businesses plan to pursue takeo - vers and mergers, says the 18th “Capital Confidence Barometer” from accountancy and business services giant EY.

It comes as shares are expected to jump inSa ins bury’ s when the stock market opens today after the supermarket giant confirmed at the weekend that it was in advanced talks about a block buster merger with rival, Asda.

Such a merger is certain to trigger an investigation by the Competition and Markets Authority, however, as it would mean a merged Sainsbur y’s/ Asda and the usurped market leader, Tesco, would account for about 60 per cent of the UK food retailing market.

Sa ins bury’ sis holding a press conference in London this morning to outline greater details of the tie-up that would create a supermarket goliath with almost £ 50 billion of annual sales.

Meanwhile, EY said the 65 percent of UK companies planning M& A action over the next 12 months was the highest level since 2010.

However, the EY report added that more UK firms were looking to Europe as a deal destination as the UK fell to fifth place on the global M& A destination list.

The United States, Brazil, China and Canada al l came ahead of it in the destination rankings.

The upbeat forecasts for consolidation come after a strong first three months for deals in 2018, when the overall value of UK M& A to tall ed$120bn (£87 bn) and covered more than 680 deals.

Ally Scott, E Y’ She ad of transaction advisory services in Scotland, said: “Rising confidence is seeing deal pipelines and M& A appetite shifting up a gear across the UK, including Scotland, where the market is increasingly vibrant. We expect this trend to continue for the foreseeable future as executives regard M& A as a growth engine.

“Improving global growth and the need for UK companies to plan for life after Brexit, mean that UK executives still have a positive perspective on global markets–especially European destinations.

“Scottish businesses are seeing an increase in opportunities in international markets while at the same time momentum is building in terms of interest from international investors in companies based in Scotland.”

So-called“portfolio transformation ”– buying and selling asset store shape portfolios for the future–is the biggest factor in driving deals over the next six months, the report adds, with 73 per cent of respondents citing it as the key influence on their ambitions. •The value of M& A involving UK food companies jumped eight-fold to£5.8bnint he year to end- March, up from £ 645m the previous year, says a report from commercial law firm EMW.