Mergers and acquisitions involving UK companies: Apr to Jun 2016

During the second quarter (Apr to June) of 2016, the number and value of successful mergers and acquisitions (M&A) involving UK companies saw notable declines when compared with the numbers and unusually high values seen in the previous quarter, Quarter 1 (Jan to Mar) 2016.

There were a total of 87 successful domestic and cross-border mergers, acquisitions and disposals involving UK companies worth £14.0 billion in Quarter 2 2016, compared with 190 successful transactions valued at £69.0 billion, reported previously in Quarter 1 2016.

Domestic acquisitions (UK companies acquiring other UK companies) during Quarter 2 2016 saw 47 completed acquisitions worth £5.9 billion, down 50% from the number reported in Quarter 1 2016 (95 acquisitions worth £11.8 billion).

There were 20 completed inward M&A transactions (foreign companies acquiring UK companies) valued at £6.3 billion in Quarter 2 2016, down 61% from 52 successful inward M&A transactions valued at £50.3 billion seen during Quarter 1 2016.

Quarter 2 2016 saw 16 successfully completed acquisitions of foreign companies abroad made by UK companies (outward M&A) worth £1.7 billion, compared with 35 valued at £6.1 billion during Quarter 1 (Jan to Mar) 2016, a decline of 54%.

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. For further information please contact us via email: ma@ons.gov.uk or telephone Sami Hamroush on +44 (0) 1633 455087.

The estimates produced for mergers and acquisitions (M&A) are vital and important components of foreign direct investment (FDI) flows data (inward and outward) and UK Balance of Payments statistics. M&A data is also published in the Blue and Pink Books.

This release covers mergers and acquisitions (M&A) transactions involving UK companies that have been successfully completed, result in a change of ultimate control of the target company and have a value of £1 million or more. 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.

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.

Data published in this bulletin for Quarter 1 (Jan to Mar) 2016 have been revised in light of new information. No revisions to the 2015 data have been made and therefore time series data for all quarters of 2015 and any previous historic quarterly periods remain unchanged.

During Quarter 2 (Apr to June) 2016, the provisional estimates for the total number and value of successful domestic and cross-border M&A involving UK companies saw lower levels of activity when compared with the numbers and unusually high values (domestic and inward M&A) reported during Quarter 1 2016 and also with the same quarter of the previous year, Quarter 2 2015.

There were a total of 87 successful domestic and cross-border M&A involving UK companies in Quarter 2 2016 valued at approximately £14.0 billion. This total included 47 domestic acquisitions valued at £5.9 billion; 20 inward acquisitions valued at £6.3 billion; 4 inward disposals valued at £0.1 billion and 16 outward acquisitions valued at £1.7 billion.

The number of total successful domestic and cross-border M&A in Quarter 2 2016 represents a 54% fall on Quarter 1 2016 (190 transactions) and a 34% fall on the number of M&A recorded at Quarter 2 2015 (131 transactions).

Overall, the number of successful M&A transactions involving UK companies has remained broadly stable since the 2008 to 2009 economic downturn, albeit with quarter-on-quarter volatility.

Recent M&A statistics can be put into context by comparing the most recent quarter with consecutive 5-year intervals since 1997 (Table 1).

Overall , the average value of completed M&A made abroad by UK companies (outward M&A) during Quarter 2 2016 was lower than the average values previously seen since Quarter 1 2007.

In contrast, during Quarter 2 2016 the average value of completed M&A involving UK companies (domestic M&A and inward M&A) per transaction was notably higher when compared with the previous average values recorded since Quarter 1 1997.

Average outward M&A

The quarterly average number of outward acquisitions during 1997 to 2001 (5-year interval) was reported as 128 completed acquisitions, with an average value of £159.0 million per transaction. The average number of outward acquisitions experienced a decline during the following 10 years, falling to a quarterly average of 67 outward acquisitions, with an average value of £119.0 million, by the end of 2011. Between Quarter 1 2012 and Quarter 1 2016, the average number of outward acquisitions then fell further, giving a quarterly average of 29 transactions, but with the average value per transaction increasing to £160.0 million.

During Quarter 2 2016, the actual number of completed outward M&A was shown as 16, with an average value per transaction of £106.0 million.

Average inward M&A

Between 1997 and 2001, the quarterly average number of completed inward acquisitions was 54, with an average value of £183.0 million per transaction. The following years (2002 to 2011) experienced relatively stable levels of M&A activity. However, between 2012 and 2016, the quarterly average number of inward acquisitions fell to 36, while the average value per transaction rose to £242.0 million.

In Quarter 2 2016, the actual number of completed inward acquisitions (20) saw evidence of a further decline of inward M&A activity, although the average value per transaction increased to £316.0 million.

Average domestic M&A

During the 15-year period between 1997 and 2011, the average number of domestic acquisitions saw a downward trend. The quarterly average number of domestic M&A for 1997 to 2001 was 136, with an average value of £80.0 million. During 2002 to 2006, domestic M&A saw an upturn in the quarterly average number of transactions (164). However, the quarterly average value saw a fall to £39.0 million per transaction. The following 5-year interval (2007 to 2011) saw the average quarterly number of domestic M&A fall to 121, with the average value per transaction remaining stable at £40.0 million.

During the interval 2012 to 2016, the average value of the 61 completed domestic acquisitions was £36.0 million, showing a decline in domestic M&A activity.

In Quarter 2 2016, the number of completed domestic acquisitions declined further to 47 successful domestic acquisitions, with an average value of £125.0 million per transaction.

Notes for summary

1. Quarter 1 is January to March, Quarter 2 is April to June, Quarter 3 is July to September and Quarter 4 is October to December.

During Quarter 2 (Apr to June) 2016, the estimates for the number and value of M&A of UK companies by other UK companies (domestic M&A) saw notable decreases when compared with the unusually high numbers and values seen during Quarter 1 (Jan to Mar) 2016.

There were 47 completed domestic M&A during Quarter 2 2016, a 51% decrease compared with 95 acquisitions reported in the previous quarter, Quarter 1 2016.

One high-profile acquisition which accounted for the majority of the total value of domestic acquisitions (£5.9 billion) during Quarter 2 2016 was Liberty Global Plc of the UK, who acquired the entire ordinary share ownership of Cable and Wireless Communications Plc of the UK.

Year-on-year comparison of successful domestic M&A between Quarter 2 2015 (59 acquisitions) and Quarter 2 2016 (47 acquisitions) saw a decline in M&A activity of approximately 20%.

The value of domestic M&A in Quarter 2 2016 also saw a considerable quarter-on-quarter decrease, reporting a value of £5.9 billion of completed transactions, a fall of 50% from the £11.8 billion previously reported in Quarter 1 2016.

In contrast, year-on-year comparison saw the value of domestic M&A that completed during Quarter 2 2016 (£5.9 billion) as the highest recorded since Quarter 3 (July to Sep) 2014 (£3.2 billion), an increase of 84%.

Other notable domestic transactions, valued at £100 million or more that took place during Quarter 2 (Apr to Jun) 2016:

• Just Retirement Group Plc of the UK acquired Partnership Assurance Group Plc of the UK

• Ventura Group Plc of the UK acquired Skyepharma Plc of the UK

• Non Standard Finance Plc of the UK acquired Everyday Loans Group of the UK

• Turbo Investments Ltd of the UK acquired Grainger Retirement Solutions Business

• Centrica Plc of the UK acquired ENER-G Cogen International Ltd of the UK

The total number of successful domestic M&A can be split 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% ordinary share ownership.

During Quarter 2 2016, domestic mergers and acquisitions involving independently-controlled companies (38 valued at £5.4 billion), represented the majority (81%) of the total number of completed domestic M&A (47).

In comparison, domestic M&A involving subsidiaries between UK company groups (9 valued at £0.4 billion) accounted for the remaining 19% of the overall total number of domestic M&A (47) involving a change of majority ordinary share ownership.

During Quarter 2 (Apr to June) 2016, the estimates for the number of inward M&A of UK companies made by foreign companies, involving a change of majority ownership, continued to see historically low levels of activity. The value of inward M&A, which completed in Quarter 2 2016, reported a notable decline when compared with the unusually high value previously reported during Quarter 1 (Jan to Mar) 2016 (Figure 4).

There were 20 completed inward M&A of UK companies during Quarter 2 2016, which was 32 fewer than the number previously reported during Quarter 1 (Jan to Mar) 2016 (52). In Quarter 2 2016, the number of inward M&A (20) also recorded the lowest level of M&A activity for 3 years, since Quarter 1 2013, when 19 successful acquisitions were reported.

One large publically-reported majority share acquisition which completed during Quarter 2 2016 was undertaken by Ball Corporation of the USA which acquired Rexam Plc of the UK.

The estimates for the value of inward M&A during Quarter 2 2016 also reported a notable decline in activity. Between Quarter 1 2016 and Quarter 2 2016, the value of inward M&A fell by approximately 87%, from £50.3 billion to a low value of £6.3 billion respectively.

Comparison of inward M&A involving a change of majority ownership, between Quarter 2 2015 and Quarter 2 2016 also indicated declines in both number and value. There were 31 inward M&A valued at £9.8 billion which successfully completed during Quarter 2 2015 compared with 20 valued at £6.3 billion in Quarter 2 2016, a year-on-year decrease of approximately 35%.

Other inward notable transactions, valued at £100 million or more that took place during Quarter 2 (Apr to June) 2016:

• CSC Computer Science International Holdings Ltd of the USA acquired Xchanging Plc of the UK

• Jahwa Group Co Ltd of China acquired Mayborn Group Plc

• Yokogawa Electric Corporation of Japan acquired KBC Advanced Technologies Plc of the UK

• Accor SA of France acquired Onefinestay

• Addeco S.A of Switzerland acquired Penna Consulting Plc of the UK

In Quarter 2 2016, there were 4 successful inward disposals valued at £0.1 billion, similar to the number of inward disposals previously seen during Quarter 1 2013, when there were 4 transactions worth £89.0 million.

During Quarter 2 (Apr to June) 2016, the provisional estimates for both the number and value of UK companies which successfully acquired foreign companies (outward M&A), involving a change of majority ownership, saw notable falls when compared with Quarter 1 (Jan to Mar) 2016, continuing to report low levels of M&A activity compared with those seen before the 2008 to 2009 economic downturn.

Between the first and second quarters of 2016, , the estimates for the number of foreign companies acquired by UK companies (outward M&A) saw a notable fall of 54%.

There were 16 completed outward M&A made by UK companies involving a change of majority ownership in Quarter 2 2016, down from the 35 reported in the previous quarter, Quarter 1 2016.The decrease follows a similar trend observed since 2013 where the number of acquisitions decreased in the second quarter of each year.

Year-on-year comparisons indicates that the number of successful outward M&A transactions between Quarter 2 2015 (31) and Quarter 2 2016 (16) have fallen by 48%, although the 16 successful transactions reported for Quarter 2 2016 appears to be on a par with the number reported previously in Quarter 2 2013 (13 transactions).

The value of successful outward M&A reported during Quarter 2 2016 (£1.7 billion) also indicated a considerable fall of 72% when compared with the previous value reported for Quarter 1 2016 (£6.1 billion). Year-on-year, the value of completed outward M&A for Quarter 2 2016 (£1.7 billion), saw a similar value to that reported 3 years previous, at Quarter 2 2013 (£1.0 billion).

Notable transactions, valued at £100 million or more, that took place abroad by UK companies in Quarter 2 (Apr to Jun) 2016:

• Dechra Pharmaceuticals Plc of the UK acquired Putney Inc of the USA

• W S Atkins Plc of the UK acquired Projects Products and Technology Division of Energy Solutions of the USA

• Micro Focus International Plc acquired Spartacus Acquisition Holding Corp of the USA

• Bridgepoint and Summit Partners of the UK acquired Calypso Technology Inc of the USA

The provisional quarterly estimates for the number and value of successful disposals of foreign companies made by UK companies (outward disposals) during Quarter 2 2016 have been suppressed in this bulletin to avoid any potential disclosure in this type of M&A activity.

The M&A data and information in this release only includes data for acquisitions, mergers and disposals which are successfully and legally completed. As part of the production process we also identify both announced and agreed M&A transactions.

The following notable M&A transactions will feature in future releases:

• Tilney Bestinvest Group Ltd to acquire Towry

• Close Brothers Group Plc of the UK acquired Eos Wealth Management Ltd of the UK

• News Corporation of the USA to acquire Wireless PLC; not confidential

• Breedon Aggregates Ltd of Jersey acquired Hope Construction Materials Ltd of the UK

• The Blackstone Group L.P of the USA to acquire Elian of the UK

• HSBC Holdings Plc of the UK disposed of HSBC Bank Brasil Banco Multiplo/HSBC Servicos E Patricipacoes of Brazil

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 to 2009 economic downturn, M&A activity declines. On the other hand, the process of completing a 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) Agents’ Summary Report for Quarter 2 (Apr to June) 2016 reported that business investment intentions for the year ahead were little changed and pointed to modest growth in investment. Business services and contacts reported reductions overall in corporate deal-making activity, as some planned mergers and acquisitions and corporate finance activity had been paused or cancelled.

The report also stated that credit conditions were thought to have tightened slightly in the financial markets and businesses’ demand for credit had remained subdued.

The BoE’s Credit Conditions Review for Quarter 2 2016 and also its Credit Conditions Survey results for Quarter 2 2016, reported that the demand for corporate credit from large corporates had slowed significantly ahead of the EU referendum. Lenders cited significantly lower demand for commercial real estate lending, less mergers and acquisitions activity and caution ahead of the referendum as factors driving this.

Deloitte Touche Tohmatsu Ltd (Delotte), a multi-national professional services firm, stated in its report “The impact of Brexit on M&A activity”, that since the beginning of 2016 both global and UK M&A markets had been slowing down.

Deloitte’s Chief Finance Officers’ (CFO) Survey Report for Quarter 2 2016, stated that the financial and economic uncertainty is weighing heavily on investment and deal decisions.

The Mergers and acquisitions Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data
• users and uses of the data
• how the output was created
• the quality of the output including the accuracy of the data