Pick up in M&A points to UK companies defying uncertainty

A total of 60 per cent of UK companies plan acquisitions over next 12 months – highest level since 2009 

UK M&A activity is set to increase in 2018, with companies remaining active at home and abroad and with the UK and its assets still attractive to overseas buyers, according to EY’s 17th Global Capital Confidence Barometer (CCB17).

The UK M&A market will remain dynamic over the next 12 months with record levels of companies (60 per cent) planning to acquire assets, up 9 percentage points since April 2017 (CCB16) and 4 percentage points ahead of the global figure. CCB17 finds that the majority of UK business executives are focusing on deals under $250m (57 per cent) or up to $500m (20 per cent).

The US remains the top-outbound destination for UK acquirers followed by France, Germany and India. According to CCB17, stronger cross-border deal making is expected to be the top UK M&A trend for the next 12 months (29 per cent) alongside a return of private equity as a major acquirer of assets (27 per cent) and an increase in activist investor intervention in M&A (20 per cent).

At the same time, UK respondents acknowledge increasing risks on the horizon with a higher level of concern for geopolitical risks and economic uncertainty (47 per cent) compared to the global average (43 per cent). According to CCB17, 50 per cent of UK respondents are reviewing their portfolio continuously or quarterly compared to 42 per cent at a global level.

The response of UK businesses to the issues raised by Brexit is also reflected in the 63 per cent of UK respondents who are reorganising their geographic operations in response to ‘potential changes in trade policies or an increase in protectionism’ - much higher than the global figure of 41 per cent.

According to CCB17, the UK still remains third on the global M&A destination list. The survey found that the US (1), China (2), Germany (4) and Australia (5) complete the list of top five investment destinations of choice amongst global executives.

Steve Ivermee, EY’s transaction advisory services managing partner, said: “UK companies are facing an unprecedented breadth of challenge and change. Given these risks, the confidence shown by UK companies implies a strong belief in their ability to respond.

“Despite this maelstrom of change, the UK still remains third on the global M&A destination list, which is a measure of the attractiveness of the UK’s open economy and eye-catching IP-rich assets.

“Looking forward, we’d expect a very active M&A market, especially on the domestic front, as companies look to innovate, but also defend against rising costs. A focus on deals of under $250m points to UK companies focusing on making smaller adjustments to their portfolio to respond to a changing market.”

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