The last six months of M&A activity across the US/UK M&A corridor reached USD126 billion, with US outbound deals to the UK rising 3.6 per cent and UK outbound deals to the US falling by 20.4 per cent.
According to the Deloitte US/UK M&A Deal Monitor, the final quarter of 2016 saw UK outbound M&A leap to USD86.4 billion in value, ensuring the US/UK deal corridor performed roughly in line with the global trend for M&A.
Cahal Dowds (pictured), partner and vice-chairman of Deloitte UK, says: “Two trends stand out in the second half of 2016, the strength of US outbound dealmaking and the sharp fall in UK outbound dealmaking. Widespread expectations of a collapse in US outbound dealmaking following the UK’s vote to leave the EU has not come to pass. On the contrary, US buying of UK assets has outperformed the previous six months.”
A total of 254 deals across the corridor were recorded in the Deal Monitor in the six months ending December 2016. 172 US outbound compared to 82 UK outbound. US outbound M&A was concentrated on London, but regional deals continue to grow securing 97 deals in the last six months.
Pauline Biddle, UK Midlands practice senior partner, says: “As expected, there has been a high concentration of M&A deals in London. Regionally, patterns have mirrored the industrial and commercial demographic of the UK. That means more industrial companies in the West Midlands, more technology in the East Midlands and East, and more services in the South East. The East of England’s high-tech companies are increasingly attracting deals, having secured 30 inbound deals last year.”
TMT still leads with 37 per cent of M&A deals, but manufacturing deals are up 9.5 per cent on the previous year. US outbound manufacturing deals rose to 45 in 2016, with the deal rate rising 45 per cent in the last six months. UK outbound manufacturing deals recorded a 36 per cent fall in the same period. The migration of technology into all business sectors is helping to create a new generation of deals in manufacturing. Deloitte’s analysis show that manufacturing is increasingly incorporating TMT, and vice versa.
"Companies everywhere are being tested on their ability to deal with technology convergence,” adds Dowds. “If you have a technology need in your product lines, then today there is a great opportunity to go out and find a company that can solve that. If you are not investing in those solutions organically then you have to buy those solutions, and quickly. This is going to create a lot of future dealmaking.
“With record levels of cash on companies’ balance sheets combined with significant funds raised by private equity, investor appetite remains strong. The US is looking beyond uncertainty as the fundamentals of M&A have seldom been stronger. In this low economic growth environment, a key way to get increased revenue is to buy it. The quest for growth continues.”
