Deal flurry lifts mergers & acquisitions to highest in a decade

THE UK has chalked up its strongest first quarter for mergers and acquisitions (M&A) in 10 years after businesses signed off £85bn worth of deals.

A total of 681 deals were secured between January and March, with telecoms, automobile and healthcare proving the hottest sectors for transactions, according to research by EY.

The result comfortably outstrips the final three months of last year when firms sealed 586 deals, wort £36bn.

However, it falls short of the 147 billion (£104bn) and 1,045 transactions seen in the first three months of 2007.

Steve Ivermee, EY’s managing partner for UK and Ireland transaction advisory services, said: “The UK deals market has experienced a very healthy start to the year as UK companies with presence in international markets remain particularly attractive to international investors.

“More significantly, we see UK businesses continuing to make deals internationally. The significant increase in inbound transactions is likely to lead to a new environment for M&A and deal makers. Some of these deals are likely to face increased scrutiny by regulators, government and the public about their purpose, which will need to extend beyond cost savings.

“Articulating this narrative in a compelling way to ensure all stakeholders are onside will become increasingly key to help ensure deals are done.”

Despite fears that Brexit uncertainty would put M&A on the back burner, GlaxoSmithKline and Novartis, GKN and Melrose, and UBM and Informa all announced tie-ups between January and March this year.

It was strong performance for inbound deals which underpinned the first-quarter rise. EY’s research pointed to 177 inbound deals worth £48bn in the three months to March, up from 133 transactions at £8bn in the fourth quarter of last year.

The US had the strongest appetite for UK firms over the period followed by France, Switzerland, Japan and the Netherlands

Mr Ivermee said: “The trade flow between the UK and the US has always been strong and there is no sign of slowing. While early days, shifts in policy, such as the recent US tax reforms, could trigger some near-term large deals, as boardrooms reassess capital allocation between the US and non-US territories.

“Looking ahead we can expect an equally strong second quarter as businesses look to lock in more favourable financing prior to any interest rate increases.”