Overall in Q3 2014 the total number of domestic and cross-border mergers and acquisitions involving UK companies remained at the low levels experienced since the 2008/09 economic downturn
There were 30 completed domestic acquisitions (UK companies acquiring other UK companies) reported in Q3 2014, the lowest since ONS first began publishing quarterly data in Q1 1969
During Q3 2014 there were 19 completed inward acquisitions of UK companies made by investors from abroad compared with 23 recorded in the previous quarter (Q2 2014). This is the lowest number of inward acquisitions reported since Q1 1988, when 16 acquisitions were reported
The number of outward acquisitions (those made abroad by UK companies fell to 18 transactions during Q3 2014, from 21 in the previous quarter
Mergers and Acquisitions (M&A) transactions which result in a change of ultimate control of the target company and have a value of £1 million or more are included in this release. Information on the number and value of transactions are reported, in addition to whether transactions are acquisitions or disposals.
Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals. These statistics are presented on a ‘current price basis’, which are prices as they were at the time of measurement and are therefore not adjusted for inflation.
There were a total of 67 domestic and cross-border acquisitions involving UK companies in Q3 2014. This included 30 domestic transactions, 19 inward transactions and 18 outward transactions and represents a 26% fall on the previous quarter (90) and a 51% fall on the number recorded at Q3 2013 (138).
The quarterly numbers and value of M&A activity are prone to large quarter-on-quarter movements as these data relate to specific ‘one time’ only transactions, for example one quarter can be heavily impacted by one large transaction. Therefore it can be more appropriate to analyse trends over time. Overall, during the third quarter of 2014 the total number of domestic and cross-border mergers and acquisitions involving UK companies remain at much lower levels of activity than before and immediately after the 2008-09 the economic downturn.
The low level of overall M&A activity during Q3 2014 can also be illustrated by looking at the average number and value of acquisitions over consecutive five-year intervals since 1997 (Table 1).
Overall, at Q3 2014 the estimates for the number of acquisitions across all three M&A surveys (outward, inwards and domestic) have all fallen below the respective average values per quarter since 2012.
However, for the same comparison periods, the average value per transaction for both outward and domestic M&A has increased. This is due to the inclusion of two large, substantive-valued acquisitions which completed during Q3 2014.
Table 1: The average number and value of M&A involving UK companies, grouped into five year intervals.
|Abroad by UK companies||Overseas companies in the UK||Between UK companies|
|Number||Value||Average value per transaction||Number||Value||Average value per transaction||Number||Value||Average value per transaction|
|£ million||£ million||£ million||£ million||£ million||£ million|
|Source: Office for National Statistics|
|1. The deal identification threshold has been increased at Q1 2010 from £0.1m to £1.0m and as a consequence there may be a discontinuity in the number and value of transactions reported.|
Download this table Table 1: The average number and value of M&A involving UK companies, grouped into five year intervals..xls (29.2 kB)
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During Q3 2014 there was a decrease of 35% in the number of quarter-on-quarter domestic M&A involving UK companies. There were 30 completed domestic acquisitions reported in Q3 2014 compared with 46 in Q2 2014, and is the lowest number of domestic M&A recorded since ONS first began publishing quarterly data (Q1 1969).
In contrast, the value of domestic acquisitions involving a change in majority share ownership increased between the second and third quarters of 2014 (from £1.3 billion in Q2 2014 to £2.9 billion in Q3 2014 – current price basis). This is the highest value recorded since Q1 2013 (£2.8 billion) (see Figure 2 below). The vast majority (69%) of the total value for domestic acquisitions at Q3 2014 (£2.9 billion) is represented by one large acquisition that occurred within the retail industry, for example Carphone Warehouse Group PLC of the UK completed the all share merger of Dixons Retail Plc of the UK.
During Q1 to Q3 2014 the combined total value of domestic M&A (£5.8 billion) has fallen by 9% when compared with the total value of domestic M&A (£6.4 billion) during the same three quarters of 2013. However, the percentage decrease for the number of domestic M&A during the same comparison periods appears much greater, reporting a 35% decrease, falling from 179 to 116 acquisitions. This may indicate that although fewer domestic acquisitions completed between these periods, the transactions which did were of a higher monetary value.
It is possible to split out the total number of domestic M&A into those made by independently-controlled companies and those which are subsidiaries. The acquisition of an independent company means the purchase of a company in its entirety, whereas the acquisition of a subsidiary means the acquisition of a part of a company, between 50.1% to 100%.
During Q3 2014 the number of acquisitions of independently-controlled companies (25), totalling £2.5 billion, represented the majority (83%) of the total number of completed domestic M&A.
In comparison, domestic acquisitions involving subsidiaries between UK company groups, valued at £0.4 billion, accounted for 17% of the overall total number of domestic M&A involving a change of majority ownership.
Other significant domestic acquisition, valued at £100 million or more, that took place during Q3 2014:
Standard Life Investments Holdings of the UK acquired Ignis Asset Management Ltd of the UK
Anacap Financial Partners LLP of the UK acquired Brightside Group PLC of the UK
In Q3 2014 there were 19 completed inward acquisitions of UK companies made by investors from abroad compared with 23 recorded in the previous quarter (Q2 2014), showing a slight fall of 17%. At Q3 2014 the number of inward acquisitions is the lowest number reported since Q1 1988, when 16 acquisitions were reported.
Despite the downturn in the number of inward acquisitions during the first three quarters of 2014, the value of inward M&A shows an increase on the previous quarter (Q2 2014). During Q3 2014 the estimates for the value of acquisitions in the UK made by investors overseas was £2.7 billion compared with £1.6 billion reported in the previous quarter (Q2 2014). This shows a quarter-on-quarter increase of approximately 69%.
Further analysis of inward M&A shows that there were 69 completed acquisitions for Q1-Q3 2014 compared with 111 recorded for Q1-Q3 2013. This shows a year-on-year decrease of approximately 38%.
At Q3 2014 there were seven inward disposals of UK companies involving a change of majority ownership with a reported value of £1.0 billion. This is similar to the number of inward disposals that completed during Q3 2013 (eight), albeit then with a slightly lower reported value of £0.6billion.
The following significant transactions, valued at £100 million or more, that took place in the UK by foreign companies during Q3 2014:
Phoenix Group Holdings of The Cayman Islands disposed of Ignis Asset Management Ltd of the UK
K+S Baltic Offshore (Cyprus) Ltd of Cyprus disposed of OCHL (Globe) Ltd of the UK
Packaging Coordinators Inc of the USA acquired Penn Pharmaceutical Services Ltd of the UK
Sanpower Group owner of Nanjing Xinjiekou Department Store Co Ltd of China acquired Highland Group Holdings Ltd of the UK
Viacom Inc of the USA acquired Channel 5 Broadcasting Ltd of the UK
Hony Capital Beijing Co Ltd of China acquired Pizza Express Ltd of the UK
Cirrus Logic INC of the USA acquired Wolfson Microelectronics Plc of the UK
KKR Management Holdings LP (USA) of the USA acquired OCHL (Globe) Ltd of the UK
Hexagon AB of Sweden acquired Vero Software Ltd of the UK
Between Q2 and Q3 2014 the number of outward acquisitions made by UK companies involving a change of majority ownership remained relatively flat. There were 18 completed acquisitions during Q3 2014, a 14% decrease when compared with the previous quarter (21). This flat trend of outward M&A activity abroad by UK companies between the second and third quarters of 2014 appears to follow a similar pattern seen since 2012.
In contrast, the value of acquisitions abroad involving UK companies increased considerably to £6.3 billion during Q3 2014, from £2.4 billion reported in Q2 2014. This indicates that although fewer acquisitions completed during Q1 to Q3 2014, the transactions which did were of a higher monetary value.
This increased value of outward acquisitions in the Q3 2014 can be partially explained by one large completed acquisition within the telecommunications industry, for example Vodafone Group Plc of the UK acquired Grupo Corporativo Ono S.A. of Spain.
Other significant transaction, valued £100 million or more, that took place abroad by UK companies in Q3 2014:
Man Group plc of the UK acquired Numeric Holdings LLC of the USA
Rolls-Royce Holdings Plc of the UK acquired Rolls-Royce Power Systems (Tognum AG) of Germany
Cobham Plc of the UK acquired Aeroflex Holding Corp of the USA
Data for the following domestic and cross-border acquisitions and mergers will be included in the next M&A quarterly estimates for Q4 2014.
Access Industries Inc of USA acquired Perform Group Plc of the UK.
Amec Group Ltd of the UK acquired Foster Wheeler of Switzerland.
British Sky Broadcasting Group Plc of the UK completed the acquisition of Sky Italia SRL of Italy.
British Sky Broadcasting Group Plc of the UK completed the takeover of Sky Deutschland AG of Germany.Nôl i'r tabl cynnwys
Global merger, acquisitions and disposals activity is often driven by the availability of credit and company profits as well as a sense of confidence in the economic outlook. The majority of large M&A transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the 2008-09 economic downturn, M&A activity declines. On the other hand, the process of completing an M&A transaction takes time and sometimes there may be a lag between improving economic conditions and any quarter-on-quarter increase in M&A activity.
The Bank of England’s (BOE) September 2014 Agents’ Summary of Business Conditions, showed that corporate credit conditions had improved further and there is a growing desire among some companies to increase their capacity. On the other hand, the BOE Credit Conditions Survey for Q3 2014stated that demand for secured corporate credit from small businesses was reported to have decreased in Q3 2014. ; demand for lending from medium-sized companies and larger corporates had increased notably. The Bank of England’s (BOE) November Quarterly Inflation report also concluded that business investment growth has continued to rise this year with that from services industries contributing the most.
The Organisation of Economic Corporation and Development (OECD) 2014 Investment Insights paper dated November 2014 also appears to support the downward trend of global and domestic M&A. Using data on M&A investment it stated that international and domestic M&A are both on track (based on data through Q3) to reach their lowest levels in a decade. Economic conditions that are holding back international investment in Europe would seem to be discouraging domestic investment as well.
Allen and Overy, an international legal practice, reported in its M&A index Q3 2014, that the surge in transactions was particularly marked as Q3 is typically quieter. However, transactions are continuing at a healthy pace and the pipeline of upcoming deals is strong enough to suggest the recovery will continue through to the year end and into 2015. In the same report it was stated that deal values in the first three quarters of 2014 are already higher than the same period of 2013, with average deal sizes at their highest level for many years.
In addition [Thomson Reuters](http://share.thomsonreuters.com/general/PR/MA-3Q14-(E).pdf "Thomson Reuters") reported in its Q3 2014 Mergers and Acquisitions Review, that the overall volume of cross-border M&A during the first nine months of 2014 more than doubled the levels reached during the first nine months of 2013. This review also suggests that the first nine months of 2014 appears to be the strongest for worldwide deal-making since 2007.Nôl i'r tabl cynnwys
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