Foreign buyers push City into deals boom: Biggest haul of British M&A activity since before financial crisis

Britain has experienced the biggest boom in M&A since the financial crisis thanks to a rush of overseas buyers, according to figures out today. 

 

Weaker sterling, low interest rates and renewed corporate confidence have sparked acquisitions of everything from oil companies to tin can makers since the start of the year.

 

The total value of takeovers involving UK firms in the first half year leapt 70 per cent from a year ago to $228.8bn (£145bn) – the biggest haul since the first half of 2007, according to accounting giant EY.

 

The figures may raise eyebrows given the uncertainty surrounding May’s election, which is believed to have held back some executives from pursuing takeover deals.

 

Yesterday’s surprise $8.7bn merger of UK-based insurer Willis Group and US consultancy Towers Watson underscored the renewed appetite for British firms from foreign buyers. 

 

Dutch firm Shell’s $82bn takeover of the UK’s BG Group – the largest in the world so far this year – and other chunky deals like the sale of phone network O2 to Hong Kong tycoon Li Ka-shing and can-maker Rexam to US firm Ball have driven the UK mini-boom. 

 

M&A bankers say this summer and the rest of the year also look busy.

 

“Nothing big has landed in the UK since the election but the pipeline is filling up,” one banker said. “You will see more activity in Europe and I’m surprised we haven’t seen more big spin-offs but we’ve got our eyes open for a big primary deal.” 

 

Cross-border activity into the UK featured heavily in this year’s deal flow, with inbound M&A into Britain up to $169bn overall – eclipsing the $44bn recorded last year. 

 

“Low interest rates make assets highly competitive and this is leading to a high number of overseas acquirers searching the UK and Europe for acquisition targets,” EY’s Michel Driessen said.

 

High levels of selling activity in the private equity sector have also supported the figures.

 

Data from the Centre for Management Buyout Research and Equistone yesterday showed private equity firms sold £21.6bn worth of assets in the UK this year – the largest tally on record.  

 

Across Europe, buyout firms offloaded €72.9bn of assets, beating the previous record of €68.7bn in the first half of 2007.

 

The UK boom reflects a broader merger frenzy across the world, with global M&A values hitting the second highest on record, according to Dealogic. The $45bn merger between Heinz and Kraft and a spate of pharmaceutical deals – such as the $51bn Mylan and Teva merger battle  and the $17bn takeover of Hospira by Pfizer – demonstrate the appetite of chief executives for large deals. 

 

There have been 21 deals globally above $10bn, according to Dealogic, compared to 15 last year.