Dealmaking ‘falls off a cliff ’ and slumps to seven-year low
● Further declines expected as virus impact worsens ● But cash-rich buyers will swoop as asset prices drop
Merger and acquisition deals by UK businesses involving overseas targets have fallen off a cliff this month according to new figures.
Data compiled by financial markets information firm Refinitiv showed that UK outbound M&A deals have totalled £7.7 billion so far during 2020, 14 per cent less than at this time last year.
While both January and February saw in excess of £3.4bn worth of outbound deals, only £259 million worth of transactions have been announced so far during March, the lowest figure since 2013 as the impact of the coronavirus shock hit home.
The number of deals so far this year is also down 17 per cent on 2019.
However, the combined value of UK domestic deals stands at £31.4bn so far during 2020, more than triple the value recorded during the same period last year and the highest year-to-date total since 2009. Much of the increase is accounted for by Aon’s £22.9bn takeover of rival insurance company Willis Towers Watson.
Inbound M&A, involving a UK target and a foreign buyer, totals £13.7bn so far during 2020, up 8 per cent in the yearto-date although the number of deals has fallen 15 per cent compared to 2019.
The value of inbound acquisitions from the European Union dropped to £654.6m, down 27 per cent from this time last year and the lowest year-to-date total since 2014. Recent M&A deals announced by overseas buyers have included American electronics giant Motorola Solutions agreeing to acquire Edinburgh-based security camera firm Indigovision in a £30.4m deal.
Investment banking fees generated in the UK totalled £822.4m so far during 2020, 12 per cent less than this time last year and the lowest yearto-date total since 2013.
After a strong start to the year with £405.6m generated in January, fees have declined for the second consecutive month to reach just £131.3m so far during March.
Cornelia Andersson, head of M&A and capital raising at Refinitiv, said: “M&A investments are driven by confidence – confidence in the target business and their future growth prospects, and confidence in the economic and political environment.
“While some companies will defy the bearish mood, many will hold back until they have more confidence in the market and further disruption to deal making this year seems inevitable.”
However, Andersson said market turmoil also creates opportunities as asset prices drop and capital raising and funding needs increase.
“It can be a lucrative market for those investors that have the capital and acumen to execute deals in challenging market conditions, such as private equity players,” she said.