Mergers and acquisitions involving UK companies: April to June 2019

• In Quarter 2 (Apr to June) 2019 the estimates for the values of both inward and domestic mergers and acquisitions (M&A) involving UK companies saw notable increases, while outward M&A saw a notable decrease when compared with Quarter 1 (Jan to Mar) 2019.

• The value of inward M&A (foreign companies abroad acquiring UK companies) was £18.4 billion in Quarter 2 2019, a sizeable increase of £10.8 billion on the £7.6 billion recorded in Quarter 1 2019.

• The value of domestic M&A (UK companies acquiring other UK companies) in Quarter 2 2019 was £2.8 billion, a £1.0 billion increase on the value recorded in Quarter 1 2019 (£1.8 billion).

• The value of outward M&A (UK companies acquiring foreign companies abroad) was £1.5 billion in Quarter 2 2019, a notable fall of £4.6 billion compared with £6.1 billion during Quarter 1 2019.

Mergers and acquisitions (M&A) occur when one company takes control of another company. The internationally agreed definition of an M&A deal is when one company gains more than 50% of the ordinary shares (or voting rights) of the acquired company. These can be domestic transactions – where a UK-based company acquires another UK company – or international. Outward M&A transactions are when a UK-based company gains control of another company overseas, while inward M&A are overseas companies acquiring UK companies.

The Office for National Statistics (ONS) produces statistics on the number and value of M&A transactions. This information is presented in the following way:

• transactions are only recorded in ONS statistics once the deal has been legally completed
• each transaction has a value of at least £1 million
• the transaction results in a change of ultimate control of the target company
• all values are in current prices, and therefore have not been adjusted for the effects of inflation

These four points are among the main reasons our M&A statistics can differ from those reported in other sources. There can be a substantial time gap between the point at which a deal is announced and when it is legally completed. In some cases, announced M&A deals do not take place. ONS statistics on disposals (or demergers) are also included in tables alongside this bulletin. These are typically fewer in number per quarter, which can lead to greater suppression of statistics to mitigate disclosure. The focus of this bulletin is on acquisitions, although some of the more complex deals can include the disposal of some part of the newly created corporate structure.

It is not uncommon for the value of M&A transactions to vary considerably from one quarter to the next. This mainly reflects the nature of M&A activity in that these capture one-off deals. Therefore, if a particularly high-value M&A deal completes in a given quarter, it can make that quarter seem out of line with those that precede and follow it. Details of any notable M&A deals that completed in Quarter 2 (Apr to June) 2019 can be found in the respective sections of this bulletin. This also makes it difficult to link M&A statistics with other economic indicators – such as gross domestic product (GDP) – or global events because of the time it can take between announcing and completing an M&A deal. It can therefore be more informative to look at longer-term trends within M&A statistics rather than focusing on quarterly movements.

Supplementary information about mergers and acquisitions involving UK companies was published in Mergers and acquisitions activity in context: 2018. This article provides more detail on annual M&A statistics.

The estimates for the value of mergers and acquisitions (M&A) of UK companies made by foreign companies during Quarter 2 (Apr to June) 2019 saw a sizeable increase when compared with Quarter 1 (Jan to Mar) 2019. The latest estimates also show a notable increase in the value of inward M&A when compared with Quarter 2 2018.

The value of inward M&A in Quarter 2 2019 was £18.4 billion, the highest since Quarter 4 2018 (£38.8 billion). Between Quarter 1 and Quarter 2 2019 the value of completed inward M&A increased from £7.6 billion to £18.4 billion, a notable increase of £10.8 billion. This increase is largely explained by one sizeable acquisition involving Marsh & McLennan of the USA which acquired Jardine Lloyd Thompson Group of the UK. When comparing the latest estimates with the same quarter a year ago (Quarter 2 2018) the value of inward M&A has increased by £11.2 billion (from £7.1 billion to £18.4 billion).

There were 126 completed inward acquisitions in Quarter 2 2019, a slight fall on the 129 reported in the previous quarter.

Value and number of inward M&A transactions involving UK companies per quarter

Other notable inward acquisitions – each valued at £100 million or more – that took place in Quarter 2 2019 were:

Taptica International Ltd of Bermuda acquired Rhythmone PLC of the UK

Roper Technologies Inc of the USA acquired The Foundry Visionmongers Ltd of the UK

Jolina Capital Inc of Canada acquired Dairy Crest Group PLC of the UK

Arthur J Gallagher & Company of the USA acquired Stackhouse Poland Group of the UK

Entertainment One Ltd of Canada acquired Audio Network Ltd of the UK

Asahi Group Holdings Ltd of Japan acquired The Fuller's Beer Company Ltd of the UK

Vinci SA of France acquired a majority stake of Gatwick Airport Ltd of the UK

PT Medco Energi Internasional Tbk of Indonesia acquired Ophir Energy PLC of the UK

NFI Group Inc of Canada acquired Alexander Dennis Ltd of the UK

John Bean Technologies Corporation of the USA acquired Proseal UK Ltd of the UK

Biogen Inc of the USA acquired Nightstar Therapeutics PLC of the UK

There were 16 inward disposals of UK companies involving a change of majority share ownership during Quarter 2 2019. These were worth £0.4 billion, the lowest value recorded since Quarter 1 (Jan to Mar) 2013 when the value was £0.1 billion.

During Quarter 2 2019 the estimates for domestic M&A (UK companies acquiring other UK companies) showed a notable increase in the value of completed deals when compared with Quarter 1 2019.

The value of domestic M&A in Quarter 2 2019 (£2.8bn) was £1.0 billion higher than the £1.8 billion recorded in Quarter 1 2019 and is in line with the £3.0 billion seen in Quarter 3 (July to Sept) 2018. This increase is largely explained by one high-valued acquisition by Ensco PLC which acquired Rowan Companies PLC of the UK.

There were 188 completed domestic acquisitions involving a change in majority share ownership in Quarter 2 2019, a decline of 46 deals on those recorded in the previous quarter (Quarter 1 2019). However, the number of domestic acquisitions in Quarter 2 2019 is consistent with the numbers recorded in the first three quarters of 2018.

Value and number of domestic M&A transactions involving UK companies per quarter

The latest estimates for the value and number of mergers and acquisitions (M&A) of foreign companies made by UK companies during Quarter 2 2019 showed sizeable decreases when compared with the previous quarter. Similarly, comparing Quarter 2 2019 with Quarter 2 2018 also shows that the number of completed outward M&A was lower.

The value of outward M&A in Quarter 2 2019 was £1.5 billion. This was a £4.6 billion decrease on the previous quarter (£6.1 billion) and a £1.2 billion decrease on the Q2 2018 value (£2.7 billion). The sizeable decline in value during Quarter 2 2019 can be explained by fewer completed acquisitions with values in excess of £100 million.

There were 48 completed outward M&A deals during Quarter 2 2019, similar in number to Quarter 3 (July to Sept) 2017 when 47 acquisitions were recorded. The latest estimates for the number of outward M&A during Quarter 2 2019 saw 29 fewer acquisitions than in the previous quarter (77) and 26 less than Quarter 2 2018 (74).

A few notable outward acquisitions which completed during Quarter 2 2019 were Smith and Nephew PLC of the UK which acquired Osiris Therapeutics Inc. of the USA and Soco International PLC of the UK which acquired Merlon Petroleum EL Fayum Company of the Cayman Islands.

Value and number of outward M&A transactions involving UK companies per quarter

There were 13 outward disposals that completed during Quarter 2 2019, worth a total of £0.6 billion. This was a notable decrease of £0.8 billion when compared with the £1.4 billion recorded in the previous quarter. Quarter 2 2019 saw the lowest value of outward disposals (£0.6 billion) since Quarter 4 2017, when the value reported at that time was £0.5 billion.

Notable outward disposals – each valued at £100m or more – that took place during Quarter 2 2019 were:

Rolls Royce Holdings PLC of the UK disposed of Rolls Royce Marine AS of Norway

Rolls Royce Holdings PLC of the UK disposed of Rolls Royce OY AB of Finland

Prudential PLC of the UK disposed of Prudential Vietnam Finance Company Ltd of Vietnam

Global merger, acquisitions and disposals activity can be driven by the availability of credit. Therefore, when credit conditions deteriorate, as happened in the 2008 to 2009 economic downturn, M&A activity declines. M&A activity can also be affected by the economic outlook and company profits, in addition to a range of other economic factors. The process of completing an M&A transaction takes time and sometimes there may be a lag between improving economic conditions and any change in M&A activity. Therefore, it is important to consider the M&A data within the wider economic context. The following summarises some external evidence from the Bank of England’s (BoE) Credit Conditions Survey, Agents Summary of Business Conditions report and the Inflation Report.

The Credit Conditions Survey Quarter 2 2019 reported that “Lenders reported a decrease in demand for corporate lending from small businesses, a slight decrease in demand from large private non-financial corporations (PNFCs) and no change in demand from medium sized PNFCs in Quarter 2 2019. Lenders expected demand for corporate lending in Quarter 3 2019 to remain unchanged for small and medium-sized businesses, and to decrease slightly for large PNFCs”.

The Agents Summary of Business Conditions report for Quarter 2 2019 reported that “Ongoing uncertainty about Brexit dampened appetite for investment in the UK, leading to weaker demand for professional services associated with such investment, for example banking, legal and real estate. Contacts also reported a recent easing in demand for consultancy services, to help with contingency planning, for example”. The same report stated that “Investment intentions weakened, as Brexit-related uncertainty weighed on sentiment, particularly among exporters. Subdued demand for credit reflected weak investment intentions resulting from uncertainty about the economic outlook. In addition, many large companies said they had refinanced some existing loans early to avoid any Brexit-related volatility around the end of March. Contacts generally reported that credit continued to be readily available. However, there were some reports that banks' appetite to lend to certain sectors had decreased. For example, contacts reported a slight reduction in the availability of credit for care home operators, store-based retailers and higher education establishments”.

The Inflation Report for May 2019 (PDF, 3.84MB) stated that “Business investment fell by 0.9% in Q4, the fourth consecutive quarter of decline. As noted in the February Report, business investment has been weak since the referendum, but that weakness has intensified since the middle of last year”. This same report stated that “Brexit-related uncertainty has led to a reduction in business investment and an increase in stock building”.

The previous M&A estimates for Quarter 1 (Jan to Mar) 2019 have been revised in the light of new information. The detailed revisions analysis is given in table R1 which is attached to this publication.

No further revisions to estimates prior to Quarter 1 2019 have been made. Therefore, time series statistics for all quarters of 2018 and any previous historic quarterly periods remain unchanged.

M&A statistics from Quarter 1 (Jan to Mar) 2018 fully incorporate the new data source and methods. This new data source has improved the coverage of smaller M&A transactions and therefore results in a discontinuity in the number of transactions reported; users are therefore advised to take care when comparing the latest estimates with the number of transactions reported for previous quarters. See Mergers and acquisitions Quality and Methodology Information for more details.

Revisions to the aggregates for M&A transactions valued at £100 million and greater principally occur for the following reasons:

Completion of transactions

On announcement of a proposed transaction, an expected completion date is usually given. The publicly reported values will be allocated to the quarter of expected completion. If the transaction is ultimately completed in an earlier or later quarter, the recorded values will be reallocated to the new quarter.

Publicly reported values

Publicly reported values are initially used to compile the aggregates. These can vary considerably from the values ultimately supplied by the respondents, frequently because the assumption of debt has been included in the publicly reported value. A nominal value is applied if no publicly reported value is available. The final values used to create the aggregates are those supplied by the respondent.

Non-completion of transactions

On announcement of a proposed transaction the publicly reported value of the transaction is recorded. If the transaction does not subsequently take place the recorded value will be deleted.

Non-share transactions

On announcement of a proposed transaction it may appear that there will be transactions in the share capital of the companies involved and the publicly reported values will be recorded. If subsequent information contradicts this, the recorded values will be amended or deleted.

Control

On announcement of a proposed transaction it may appear that the transaction will give the purchasing company control of the purchased company, that is, a share ownership of greater than 50%. If subsequent information contradicts this, the recorded values will be amended or deleted.

Revisions from M&A data source

The current source provider of M&A deal information continually updates its database. Therefore, any new and additional reported transactions which completed in previous quarterly periods will be included as revisions to deal data and information.

Revisions from respondents

Very occasionally, respondents revise the values that they have previously supplied to us. The revised values are those used to create the aggregates.

The Mergers and acquisitions Quality and Methodology Information report contains important information on the strengths and limitations of these data and how they compare with related data:

• uses and users of these data

• how the output was created

• the quality of the output including the accuracy of these data

It is sometimes necessary to suppress figures for certain items in order to avoid disclosing information about an individual business. Further information on why data are suppressed is available in the Office for National Statistics (ONS) Disclosure Control Policy.

There is a Business and Trade Statistics community on the StatsUserNet website. StatsUserNet is the Royal Statistical Society’s interactive site for users of official statistics. The community objectives are to promote dialogue and share information between users and producers of official business and trade statistics about the structure, content and performance of businesses within the UK. Anyone can join the discussions by registering via either of the links.