M&A in the UK falls a third on coronavirus and recession fears

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HMRC tax receipts for the first two-thirds of the 2023-24 financial year showed that £6bn was collected in IPT.
HMRC tax receipts for the first two-thirds of the 2023-24 financial year showed that £6bn was collected in IPT.

Dealmaking in the UK fell off a cliff this month with outbound M&A dropping to a seven-year low, as activity slowed amid the coronavirus outbreak.

The global pandemic has sent markets into a frenzy, fuelling fears of severe damage to the economy and forcing central banks to take drastic emergency stimulus measures since the financial crisis.

Four major deals, with a combined value of £54.6bn, have skewed the picture somewhat by driving up the value of dealmaking when the volume has dropped, according to data from Refinitiv.

The number of deals announced so far this year has declined 31% with monthly totals in decline since November last year.

The combined value of UK domestic deals is £31.4bn so far, more than triple the recorded amount during the same period last year. Aon’s £22.9 billion takeover of rival insurance company Willis Towers Watson accounts for 81% of UK domestic M&A by value.

Deals involving a UK buyer and an overseas acquisition total £7.7bn so far this year, 14 per cent less than at this time last year and a seven year low.

Richard Moulton, partner and co-head of the global corporate and M&A team at Eversheds Sutherland, said: “Clearly this situation is moving at pace, both from a health perspective but also from an economic perspective.”

“This has a direct knock-on consequence for most M&A processes due to the increased uncertainty as to the implications for the relevant target business, in respect of current trading and potentially broader structural ramifications.”

“However, there are some exceptions where we are seeing deal activity holding up, for example, within clean energy, financial services and Tech. Inevitably, another area that will also increase in activity will be distressed M&A.”

Investment banking fees generated in the UK total £822.4m so far during 2020, 12 per cent less than the value recorded at this time last year and the lowest year-to-date total since 2013. 

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