The total value of inward merger deals, where overseas businesses buy British firms, declined 39% to £6.1billion in the three months to March 31, the lowest figure since 2020, the Office for National Statistics said
There was a significant drop in foreign takeover deals involving British firms in the last quarter, reports The Office for National Statistics (ONS).
Inward merger deals, where overseas businesses acquire UK companies, fell by 39% to £6.1billion in the three months leading up to March 31, marking the lowest figure since 2020. Only 144 UK firms were bought by foreign investors, representing a decrease of 16% from the previous quarter.
One of the largest inward acquisitions of the first quarter was the purchase of British oil and gas company Neptune Energy by Italy’s Eni for £3.9billion. These low figures seem to be a carryover from 2023, a year that witnessed a slump in M&A activity in the UK due to soaring inflation rates and interest rate hikes by the Bank of England.
However, these statistics precede a recent surge of renewed interest in British firms from foreign buyers, with several high-profile approaches made in May alone. London-listed companies such as Royal Mail and mining group Anglo American are currently being targeted, with the former receiving a £3.5billion bid from Czech billionaire Daniel Kretinsky just last week.
In addition, Australian mining giant BHP is trying to finalise a £39billion takeover of Anglo American. Also in May, UK retail investment platform Hargreaves Lansdown announced it had turned down a nearly £5billion takeover proposal from a consortium of overseas private equity firms.
James Wild, partner and head of M&A at consultant RSM, commented: “UK M&A activity has been subdued this past 18 months but glimpses of an improving market are appearing as investor confidence makes a comeback. With the UK’s economic recovery on the right path, inflation set to fall back to 2% and interest rate cuts on the horizon, this will provide further certainty to the M&A market which is crucial to getting deals done.”
“Plus, with the announcement of the General Election coming sooner than expected, this may prompt some sellers and buyers to get deals over the line ahead of any potential tax changes. At the same time, having greater certainty over the next government earlier on in the year sets the stage for M&A activity to return to normal levels by the end of 2024.”
Mr Wild added: “While appetite to sell is building and sellers’ price expectations are realigning to current market conditions, deals are still taking longer to complete. That said, after sitting on their hands for some time, the private equity market is starting to make its return. Pressure to deploy the build-up of cash will likely see sectors such as business services, technology and healthcare benefit the most.”
The drop in inward deals completed in the first quarter drove down the total M&A activity involving British firms, which ticked down 4% in the first quarter of this year. The ONS revealed on Tuesday that UK companies were involved in 426 takeovers, both inward and outward, compared to 444 in the three months leading up to December 31.
