articles Corporate /en/research-insights/articles/if-you-dare-to-look-brexit-takes-toll-on-ma-in-the-uk-continued content
BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
PRIVACY & COOKIE NOTICE
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *

* Required

In This List

If You Dare to Look: Brexit Takes Toll on M&A in the UK... Continued

S&P Dow Jones Indices

How Smart Beta Strategies Work in the Chinese Market

S&P Dow Jones Indices

Considering the Risk from Future Carbon Prices

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Global

Best Practices in Corporate Climate Disclosure


If You Dare to Look: Brexit Takes Toll on M&A in the UK... Continued

Just over four months have passed since the UK’s decision on Brexit, but the catastrophic end to the UK as we know it, as many were predicting, hasn’t happened. What we continue to have is uncertainty, and this will remain until Brexit actually happens. The pound’s decline and the threat of increased inflation are a cause for concern and will no doubt have an impact on business decisions for the foreseeable future. How is this impacting the M&A market in the UK? Following on from our previous analysis, we have again looked at the activity for both UK companies being acquired and acquisitions of UK companies on a monthly basis, from January 2011 to the end of October 2016.

Key findings:

  • Acquisitions of UK companies, down 15.8% on average for the period January to October
  • Deal values of UK companies acquired, down 18% on average for the period January to October
  • Acquisitions made by UK companies, down 16.2% on average for the period January to October
  • Deal values of acquisitions made by UK companies, up 6% on average for the period January to October

The chart above shows the average number of acquisitions of UK companies by month. From May to October we have seen a steep decline in the number of acquisitions of UK companies. For the period of May to the end of October we would expect to see at least 130 deals each month on average, compared to the average of 99 in 2016, a decline of 24%.

In addition, as Figure 2 below demonstrates, the deal values of UK companies being bought continue to be below average, with August deal values down 62% ($4.2bn vs $11.3bn) and September down 74% on average. October has been a little more successful and is only 3% down on its monthly average ($12.3bn vs 12.7bn).

Now, let’s take a look at UK companies making acquisitions. Looking at Figure 3 below we would expect to see a slow down over the summer months. However, the drop off in 2016 was a lot more dramatic. Interestingly, July seems to be a peak month for UK buyers, but we see a decline of 31% from 142 announced deals to 99 this year. Despite the trend lines being similar, the decline is apparent this year, currently standing at 16.2% below the average.

The story is the same when we look at deal values of UK buyers in Figure 4 below. That is until we look at October! When we look at the deal value size, only February and October this year have shown above average numbers, but we know October’s numbers were helped by British American Tobacco’s announcement to acquire Reynolds American Inc. for $59.6bn. If we take this deal out of the equation, October’s numbers would have been down 33% on its average at $14.95bn vs bn22.4bn.

So, we continue to see the slowdown as predicted by many, and the moves away from monthly volume and value averages do indeed look a lot bigger since Brexit. However, we have seen some glimmers of light; Softbank’s acquisition of ARM holdings for $23.6bn in July, and perhaps more surprisingly British American Tobacco’s announcement to acquire Reynolds American Inc. in October. This particular deal seems to go against all of the warnings we have been hearing that a weak Sterling will hamper UK buyers. What we have to realise is that there are many companies just like BAT that receive a large proportion of their revenues in foreign currencies and these are worth a lot more now Sterling has fallen. In addition, the low interest environment allows for debt to be taken on at historic low rates. Looking at current trends, it does seem like we will continue to see a decline in terms of both volume and value, but there will no doubt be more of these glimmers of light.