Rise in foreign takeovers
With news today from the ONS saying that foreign firms have bought £7.8bn worth of UK companies in the latest quarter, please see comment from James Klein, corporate and M&A partner at Spencer West LLP:
“It is unsurprising that certain M&A activity levels have continued over the Summer. This has been a continuing trend as overseas buyers – particularly US buyers – continue to target lower priced or more attractively-priced UK assets.
Whilst it can be misleading to compare activity levels against previous quarters or years when there are (for example) outlier deals (like the Quanex/Tyman transaction), various deals perhaps not being reported or announced, and even the size of transactions differing across reporting, deal activity of overseas investors and buyers will likely continue.
From a UK perspective, the flow of domestic and overseas deals has clearly dipped due to macroeconomic factors such as (higher) interest rate uncertainty as well as key political events such as the Budget and US Presidential election. This is likely to pick up now in particular with a number of transactions likely to complete before year end.
This is of course not all about traditional M&A – we have also see an increase in the volume of investments into UK businesses made by overseas investors. The UK’s stable regulatory and legal framework, the UK’s tax regime and commonality of language with certain overseas jurisdictions continues to be attractive to overseas buyers and investors. The UK’s focus on key sectors such as fintech and the technology and life sciences sectors as well as, for example, renewable energy, has meant these businesses continue to blossom and grow and become attractive targets.
UK companies are increasingly looking overseas, particularly to the US, for strategic partnerships and this can invariably lead to further deal activity. On the flip side, for many overseas companies, acquiring UK businesses offers strategic and logical diversification, allowing them to spread their risk portfolio and access new customer bases and revenue streams.
In my view the rise in overseas investment is set to continue into next year and will undoubtedly increase, but I would expect UK M&A activity to pick up at the same time now that the Budget is out the way.”