Mergers and acquisitions involving UK companies: January to March 2019

• The estimates for the value and numbers of mergers and acquisitions (M&A) involving UK companies in Quarter 1 (Jan to Mar) 2019 saw notable decreases when compared with activity in Quarter 4 (Oct to Dec) 2018 and Quarter 1 (Jan to Mar) 2018.

• The value of inward M&A (foreign companies abroad acquiring UK companies) was £6.3 billion in Quarter 1 2019, a sizeable decrease on the value recorded in Quarter 4 2018 (£38.8 billion).

• Outward M&A (UK companies acquiring foreign companies abroad) was valued at £5.4 billion in Quarter 1 2019, a notable fall of £5.1 billion when compared with the value of £10.5 billion during Quarter 4 2018.

• The value of domestic M&A (UK companies acquiring other UK companies) in Quarter 1 2019 was £1.4 billion, a £4.2 billion decrease on the value recorded in Quarter 4 2018 (£5.6 billion).

Mergers and acquisitions (M&A) occur when one company takes control of another company. The internationally agreed definition of a 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 from 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 transactions 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 approaches 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 de-mergers) 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 1 (Jan to Mar) 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 – or global events because of the time it can take between announcing and completing a 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 total value of inward mergers and acquisitions (M&A) in Quarter 1 (Jan to Mar) 2019 was £6.3 billion, the lowest since Quarter 4 (Oct to Dec) 2017 when the value was £3.5 billion. Between Quarter 4 2018 and Quarter 1 2019, the value of inward M&A decreased from £38.8 billion to £6.3 billion. Comparison between Quarter 1 2018 (£25.5 billion) and Quarter 1 2019 (£6.3 billion) also saw a sizeable decrease of £19.2 billion. This notable decrease in value at Quarter 1 2019 is explained by the absence of a few high-valued transactions which were previously reported in Quarter 1 2018 and Quarter 4 2018.

There were 121 completed inward acquisitions of UK companies by foreign companies in Quarter 1 2019, a fall on the number (137) reported in Quarter 4 2018 and 55 fewer deals than Quarter 1 2018 (176).

One sizeable inward acquisition in Quarter 1 2019 was the completed deal between the Coca-Cola Company of the USA which acquired Costa Limited of the UK, from Whitbread Plc of the UK.

Other notable inward acquisitions – each valued at £100 million or more – that took place in Quarter 1 2019 were:

Ingevity Corporation of the USA acquired Perstop UK Ltd of the UK

Ecolab Inc of the USA acquired Bioquell Plc of the UK

DNO ASA of Norway acquired Faroe Petroleum Plc of the UK

There were 10 inward disposals of UK companies involving a change of majority share ownership during Quarter 1 2019. These were worth £0.8 billion, the lowest value recorded since Quarter 2 (Apr to June) 2016 when the value was £0.6 billion.

One notable inward disposal – valued at £100 million or more that took place in Quarter 1 2019 was Stensmolla SCSP of Luxembourg disposed of Perstorp UK Ltd of the UK.

The value of outward merger and acquisitions (M&A) (UK companies acquiring foreign companies abroad) in Quarter 1 (Jan to Mar) 2019 was £5.4 billion. This was a £5.1 billion decrease when compared with the previous quarter (£10.5 billion) and a £1.0 billion increase on the value of £4.4 billion seen during Quarter 3 (July to Sept) 2018. Similarly, comparing Quarter 1 2019 (£5.4 billion) with Quarter 1 2018 (£6.1 billion) shows that the value of outward M&A deals was lower.

There were 72 completed outward M&A deals during Quarter 1 2019, a similar number to the 78 deals recorded in Quarter 4 (Oct to Dec) 2018. However, the number of outward M&A transactions in Quarter 1 2019 saw a decrease of 10 deals when compared with Quarter 1 2018 (82 deals).

One high-value outward acquisition completed during Quarter 1 2019 was GlaxoSmithKline Plc of the UK which acquired Tesaro Inc of the USA.

There were other notable outward acquisitions – each valued at £100m or more – that took place during Quarter 1 2019, including:

GB Group Plc of the UK acquired Idology Inc of the USA

Intercontinental Hotels Group Plc of the UK acquired Sustainable Luxury Management (Thailand) Ltd of Thailand

Primary Health Properties Plc of the UK acquired Medicx Fund Ltd of Guernsey

There were just five outward disposals that completed during Quarter 1 2019, worth a total of £0.9 billion. This was a decrease of £0.7 billion when compared to the value of £1.6 billion recorded in the previous quarter. Quarter 1 2019 saw the lowest value of outward disposals since Quarter 4 2017, when the value was £0.5 billion.

Notable outward disposals – each valued at £100m or more – that took place during Quarter 1 2019 were:

Atlantic Investments Holdings Ltd of the UK disposed of AHT Cooling Systems Gmbh of Austria

Mercury UK Holdco Ltd of the UK disposed of OASI of Italy

In Quarter 1 (Jan to Mar) 2019 the estimate for the value of domestic mergers and acquisitions (M&A) (UK companies acquiring other UK companies) was £1.4 billion. This was £3.2 billion lower than the value of £5.6 billion recorded in Quarter 4 (Oct to Dec) 2018 and is the lowest value seen since Quarter 3 2015 and Quarter 4 2015 (when they were both £1.2 billion). Similarly, the Quarter 1 2019 value of domestic M&A (£1.4 billion) also showed a notable decrease of £5.8 billion when compared with Quarter 1 2018 (£7.2 billion).

There were 201 completed domestic acquisitions involving a change in majority share ownership in Quarter 1 2019, a decline of 102 deals on those recorded in Quarter 4 2018. However, the number of domestic acquisitions in Quarter 1 2019 (201) is consistent with the numbers of domestic M&A deals recorded in the first three quarters of 2018.

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, mergers and acquisitions (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 a 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 and Inflation report.

The Bank of England's (BOE) Credit Conditions Survey Quarter 1 2019 (PDF, 1.49MB) reported that “the overall availability of credit to the corporate sector was reported to have remained unchanged in Quarter 1 2019, and this was the case for small, medium and large businesses. The overall availability of credit to the corporate sector was expected to remain unchanged in Quarter 2 2019”. The same survey reported that “lenders reported a decrease in demand for corporate lending from businesses of all sizes in Quarter 1 2019. Lenders expected demand for corporate lending to remain unchanged for small businesses, decrease slightly for medium private non-financial corporations (PNFCs) and decrease for large PNFCs in Quarter 2 2019”.

The Bank of England (BOE) Agents Summary of Business Conditions report for Quarter 1 2019 stated that “business and financial services activity slowed a little but grew at a modest rate. Activity began to soften in some areas where growth had previously been strong, such as professional services and mergers and acquisitions. The stalling of some commercial property deals had a negative impact on businesses in the legal, consultancy and financial sectors. Contacts said weaker demand reflected Brexit uncertainty and concerns about UK political stability as well as worries about trade tensions between the US and China, which could have a knock-on effect on professional services. However, contacts thought that activity could pick up again if Brexit-related uncertainty cleared”. This same report also stated that “Investment intentions fell sharply in manufacturing, mostly due to Brexit uncertainty. There was a modest decline in investment intentions in the services sector”.

The Bank of England's (BOE) Inflation report for February 2019 (PDF, 4.27MB) reported that “weak investment appears to primarily reflect Brexit and associated uncertainty. The recovery of business investment from the 2008 recession was broadly in line with previous episodes until the EU Referendum Act was passed in 2015. Since then the recovery in business investment has stalled. Surveys of companies generally confirm the negative impact of Brexit uncertainties on investment. The Agents’ recent survey of investment intentions cited Brexit as the largest headwind to capital spending and the Bank’s Decision Maker Panel (DMP) Survey suggests that Brexit’s importance as a source of uncertainty has risen further in recent months”.

Mergers and acquisitions (M&A) Statistics for Quarter 1 (Jan to Mar); Quarter 2 (Apr to June); Quarter 3 (July to Sept) and Quarter 4 (Oct to Dec) 2018 have been revised in the light of new information.

No further revisions to estimates prior to Quarter 1 2018 have been made. Therefore, time series statistics for all quarters of 2017 and any previous historic quarterly periods remain unchanged.

M&A statistics from Quarter 1 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 information).

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 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 it compares 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 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.