Foreign takeovers on the rise as weak pound makes UK attractive

FOREIGN firms took full advantage of the weaker pound to snap up British companies at bargain prices last year, fuelling a significant rise in the pace of dealmaking.

Overseas investors accounted for 44pc of deals in the UK and Ireland, up from 29pc in 2017, according to research published by the mergers and acquisitions firm Livingstone.

The flurry of deals involving foreign buyers pushed the total number of inward and domestic transactions to 1,802 for the year, 27pc higher than the previous 12 months.

In comparison, dealmaking in Europe, including the UK and Ireland, hit 4,941 transactions last year – 6pc higher than 2017.

“Overseas investors remain undeterred by the ongoing political turbulence facing the UK and Ireland, and mid-market investors are not letting headlines distract them,” said Daniel Domberger, a partner at Livingstone. Figures illustrate that the strongest appetite for British and Irish businesses came from the Americas, which took a 46pc share of all inward deals, followed by European investors with a 40pc share.

The biggest move by a US buyer was Comcast’s $39.8bn (£30.6bn) takeover of satellite TV broadcaster Sky. The most active sector for deals was business services, which ended the year with 731 transactions – a quarter of which stemmed from buyers in the financial services industry.

While Livingstone did not expect the demand for business services assets to slow down, the firm said any shortage of resources and skills after the UK leaves the EU could weigh on growth for the sector.

Rampant dealmaking in the business services industry was closely followed by the media and technology sector with 392 transactions and the industrials sector with 293 transactions.

Consumer activity reached 280 deals, while the number of healthcare industry transactions rose 14pc to 106.

Roger Barron, a partner at law firm Paul Hastings, said that while deal activity in 2018 had benefited from factors including low interest rates, cash surpluses and active private equity buyers, investors would be closely watching the outcome of the Government’s Brexit negotiations.

Matthew Poxon, another partner at the same firm, believes weaker stock market valuations of UK businesses could also make it more difficult for both sides to pin down a valuation.

“Unless buyers feel comfortable on valuations, they will exercise more caution,” he said.