Mergers and acquisitions involving UK companies: October to December 2019

A short article has been published alongside this statistical bulletin to provide additional context for mergers and acquisitions (M&A) involving UK companies that completed during 2019:

• Mergers and acquisitions involving UK companies, annual overview: 2019

• In Quarter 4 (Oct to Dec) 2019, cross-border mergers and acquisitions (M&A) involving a change in majority share ownership saw notable decreases in both value and number, while domestic M&A recorded an increase in the value but a fall in the number of deals.

• During January to December 2019, the estimates for the values of inward and domestic M&A saw notable decreases from 2018; outward M&A also fell.

• Domestic M&A (UK companies acquiring other UK companies) was valued at £2.4 billion in Quarter 4 2019, higher than the previous quarter (£1.6 billion); the total value for domestic M&A for the whole of 2019 was £8.7 billion, notably lower than the value in 2018 (£27.7 billion).

• In Quarter 4 2019, estimates for the total value of inward M&A (foreign companies abroad acquiring UK companies) was £13.4 billion, slightly lower than Quarter 3 (Jul to Sept) 2019 (£14.0 billion); the value of inward M&A for 2019 was £53.8 billion, a sizeable decrease of £25.0 billion compared with 2018 (£78.8 billion).

• The value of outward M&A (UK companies acquiring foreign companies abroad) was £3.5 billion in Quarter 4 2019, a decrease of £4.2 billion on the value recorded in the previous quarter (£7.7 billion); in 2019, outward M&A was worth a total of £20.9 billion, much lower than 2017 (£77.5 billion) and £2.9 billion lower than the value in 2018 (£23.8 billion).

In Quarter 4 (Oct to Dec) 2019, the estimates for the value of domestic mergers and acquisitions (M&A) (UK companies acquiring other UK companies) saw an increase when compared with Quarter 3 (July to Sept) 2019. However, the number of completed domestic M&A recorded a decrease.

The value of domestic M&A in Quarter 4 2019 was £2.4 billion, £0.8 billion higher than the £1.6 billion recorded in Quarter 3 2019. This can be explained by the completion of more higher-valued acquisitions when compared with Quarter 3 2019 (Figure 1).

One higher-valued acquisition that completed in Quarter 4 2019 was OneSavings Bank Plc of the UK, which acquired Charter Court Financial Services Group Plc of the UK.

There were 186 completed domestic acquisitions involving a change in majority share ownership in Quarter 4 2019. This was the lowest number of domestic M&A activities seen since Quarter 4 2017, when 54 acquisitions were recorded (Figure 2).

Between 2018 and 2019, the value and number of domestic M&A recorded notable decreases (Figure 3).

In 2019, the value of completed domestic M&A was £8.7 billion, a sizeable decrease of £19.0 billion when compared with the £27.7 billion recorded in 2018. This decrease in value during 2019 can be explained by a reduction in higher-value domestic M&A transactions. Year-on-year comparison also shows that the value of completed domestic M&A during 2019 was the lowest recorded since 2015, when the value was £6.9 billion.

One notable domestic M&A that took place in 2019 was Ensco Plc of the UK, which acquired Rowan Companies Plc of the UK.

There were 871 completed domestic M&A involving a change in majority share ownership in 2019, a notable decrease of 89 transactions on the number recorded in 2018 (960).

The estimates for the value and number of mergers and acquisitions (M&A) of UK companies made by foreign companies during Quarter 4 (Oct to Dec) 2019 saw decreases when compared with Quarter 3 (July to Sept) 2019.

The total value of inward M&A in Quarter 4 2019 was £13.4 billion, a decrease of £0.6 billion when compared with the value recorded in Quarter 3 2019 (£14.0 billion) and £25.4 billion lower than the value of £38.8 billion recorded in Quarter 4 2018 (Figure 4).

One higher-value transaction that completed in Quarter 4 2019 was the acquisition of Merlin Entertainments Plc of the UK by a LEGO holding company Kirkbi A/S of Denmark.

There were 108 successful inward acquisitions by foreign companies in Quarter 4 2019, a decrease of 45 transactions on the number reported in Quarter 3 2019 (153) and 29 fewer than Quarter 4 2018 (137), as shown in Figure 5.

Other notable inward mergers and acquisitions - each valued at £100 million or above - that took place in Quarter 4 2019

Swiss Re Reassure Midco Ltd of Jersey acquired Old Mutual Wealth Life Assurance Ltd of the UK.

CBRE Group Inc of the US acquired Telford Homes Plc of the UK.

Pilgrims Pride Corporation of the US acquired Tulip International UK Limited of the UK.

Costar Group Inc of the US acquired STR Global Limited of the UK.

CK Asset Holdings Ltd of Cayman Islands acquired Greene King Plc of the UK.

Confluence Technologies Inc of the US acquired Statpro Group Plc of the UK.

Delek Group Ltd of Israel acquired Chevron North Sea Ltd of the UK.

Allianz SE of Germany acquired Liverpool Victoria General Insurance Group Ltd of the UK.

Allianz Europaea Societas of Germany acquired Legal and General Insurance Limited of the UK.

Marriot International Inc of the US acquired Elegant Hotels Group Plc of the UK.

Toyota Fleet Mobility GMBH of Germany acquired Inchcape Fleet Solutions Ltd of the UK.

Seplat Petroleum Development Company Pl of Nigeria acquired Eland Oil & Gas Plc of the UK.

There were 16 inward disposals of UK companies involving a change of majority share ownership during Quarter 4 2019. These were worth £1.9 billion, a decrease of £1.5 billion on the value reported in Quarter 3 2019 (£3.4 billion).

One notable disposal that took place during Quarter 4 2019 was Chevron Corporation of the US, which sold Chevron North Sea Ltd of the UK.

The value and number of inward mergers and acquisitions (M&A) saw sizeable decreases in 2019 when compared with 2018 (Figure 6).

In 2019, there were 575 completed inward acquisitions, worth a total of £53.8 billion, compared with 603 inward M&A, with a value of £78.8 billion recorded in 2018.

While historically, the value of inward M&A has been volatile, the decrease seen during 2019 can be explained by fewer higher-value acquisitions compared with 2018. Further information can be found in Mergers and acquisitions involving UK companies, annual overview: 2019.

Other notable inward mergers and acquisitions - each valued at £100 million and above - that took place in 2019

In Quarter 1 (Jan to Mar) 2019:

• Ingevity Corporation of the US acquired Perstorp UK Ltd of the UK

• The Coca-Cola Company of the US acquired Costa Ltd of the UK

• Ecolab Inc of the US acquired Bioquell Plc of the UK

• DNO ASA of Norway acquired Faroe Petroleum Plc of the UK

• EBRO Foods S.A. of Spain acquired Tilda Ltd of the UK

In Quarter 2 (Apr to June) 2019:

• Marsh & McLennan Companies Inc of the US acquired Jardine Lloyd Thompson Group Plc of the UK

• Taptica International Ltd of Bermuda acquired Rhythmone Plc of the UK

• JolinaCapital Inc of Canada acquired Dairy Crest Group Plc of the UK

• Arthur J Gallagher & Company of the US acquired Stackhouse Poland Group Ltd 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 International 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 US acquired Proseal UK Ltd of the UK

• Biogen Inc of the US acquired Nightstar Therapeutics Plc of the UK

In Quarter 3 (July to Sept) 2019:

• Ebro Foods S.A. of Spain acquired Tilda Ltd of the UK

• Modern Media Acquisition Corp of the US merger with Akazoo Ltd of the UK

• Boston Scientific Corporation of the US acquired BTG Plc of the UK

• Bracco Imaging SPA of Italy acquired Blue Earth Diagnostics Ltd of the UK

Area analysis of mergers and acquisitions in the UK by foreign companies - 2005 to 2019

The majority (503) of total inward M&A deals in 2019 (575) came from the Americas(269) and Europe (234), which is comparable with 2018. In 2018, 603 inward M&A deals were recorded, with 267 from foreign companies located in the Americas and 254 from Europe (Figure 7).

The latest estimates for the value of mergers and acquisitions (M&A) of foreign companies made by UK companies during Quarter 4 (Oct to Dec) 2019 showed a decrease when compared with both Quarter 3 (July to Sept) 2019 and Quarter 4 2018 (Figure 8).

The value of outward M&A involving a change in majority share ownership in Quarter 4 2019 was £3.5 billion, a £4.2 billion decrease compared with Quarter 3 2019 (£7.7 billion) and a £7.0 billion decrease from Quarter 4 2018 (£10.5 billion).

There were 44 completed outward M&A deals during Quarter 4 2019, similar to Quarter 3 2019 when 54 acquisitions were recorded but 34 fewer than Quarter 4 2018 (78).

One sizeable outward acquisition that completed during Quarter 4 2019 was The Unite Group Plc of the UK, which acquired Liberty Living Group Plc of Jersey.

Other notable outward acquisitions - each valued at £100 million or above - that took place in Quarter 4 2019

Queensgate Investment LLP of the UK acquired Sydell Indian Creek LLC of the US.

The Rank Group Plc of the UK acquired Stride Gaming Plc of Jersey.

Homeserve Plc of the UK acquired ELocal USA LLC of the US.

Codemasters Group Holdings Plc of the UK acquired Slightly Mad Studios Private Ltd of Singapore.

Royal Dutch Shell Plc of the UK acquired ERM Power Ltd of Australia.

During Quarter 4 2019, there were 13 outward disposals involving a change of majority share ownership. These transactions were valued at £0.6 billion, a smaller value than the value in Quarter 3 2019 (£10.1 billion) when 28 disposals were reported. The decrease in both number and value of outward disposals seen in Quarter 4 2019 can be largely explained by fewer deals completing and those that were successful being of smaller values.

Outward mergers and acquisitions (M&A) activity declined during 2019, recording decreases in both the value and number of acquisitions involving a change of majority share ownership (Figure 10).

In 2019, the total value of completed outward M&A was £20.9 billion, £2.9 billion lower then the value in 2018 (£23.8 billion) and the lowest recorded since 2016 (£17.3 billion). Looking at the longer time series, the values in recent years are notably lower than the £77.5 billion value recorded in 2017, the highest value since 2011 (£50.2 billion). This is explained by acquisitions of lower values being completed.

There were 250 successful outward M&A transactions during 2019; this was 51 fewer deals than in the previous year (301) and similar to the 2011 level (286).

Notable outward mergers and acquisitions - each valued at £100 million and above - that took place in 2019

In Quarter 1 (Jan to Mar) 2019:

• GB Group Plc of the UK acquired Idology Inc of the US

• GlaxoSmithKline Plc of the UK acquired Tesaro Inc of the US

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

• Mercury UK Holdco Ltd of the UK disposed of OASI - Outsourcing Applicativo E Servizi Innovativi SPA of Italy

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

In Quarter 2 (Apr to June) 2019:

• Soco International Plc of the UK acquired Merlon Petroleum EL Fayum Company of Cayman Islands

• Smith & Nephew Plc of the UK acquired Osiris Therapeutics Inc of the US

• 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

In Quarter 3 (July to Sept) 2019:

• Vodafone Group Plc of the UK disposed of Vodafone New Zealand Ltd of New Zealand

• Vodafone Group Plc of the UK acquired European Liberty Global Operations of Germany

• Liberty Global Plc of the UK disposed of European Liberty Global Operations of Germany

• Royal Dutch Shell Plc of the UK disposed of Shell Olie-OG Gasudvinding Danmark BV of Denmark

Area analysis of acquisitions made abroad by UK companies - 2005 to 2019

The majority of the outward M&A deals in 2019 (250), which were worth a combined £20.9 billion, came from the Americas (100) and Europe (106). This is consistent with the area analysis reported in 2018, which also recorded the majority of the total 301 outward acquisitions came from Europe (163) and the Americas (98) (Figure 11).

The longer-term trend in mergers and acquisitions (M&A) activity has been one of decreasing numbers and values. This can be seen in Table 1, which shows the average number and value of each type of M&A transaction over five-year intervals since 1993. For example, there was an average of 186 domestic acquisitions per quarter between 2003 and 2007, which decreased to an average of 73 transactions per quarter between 2013 and 2017. The average value of domestic acquisitions also fell from £6.5 billion per quarter to £3.3 billion per year between these periods.

Similarly, the numbers of inward acquisitions have also decreased between the periods 2003 to 2007 (54) and 2013 to 2017 (46), yet the average quarterly values increased from £12.5 billion to £15.3 billion.

Notes

1. *A new method for compiling mergers and acquisitions (M&A) statistics was introduced from Quarter 1 (Jan to Mar) 2018, which may lead to a structural break in all M&A statistical time series. More information regarding these changes can be found in the M&A QMI.
2. Quarter 1 covers January to March; Quarter 2 covers April to June; Quarter 3 covers July to September; and Quarter 4 covers October to December.
3. At Quarter 4 2019, the actual number of completed deals is used to calculate the average value per transaction.
4. Value of deals are in current prices and consequently do not account for the effects of inflation over time.

The impact of some higher-valued M&A deals that completed during Quarter 1 (Jan to Mar) 2018 through to Quarter 3 (July to Sept) 2019 is reflected in the average values for inward M&A transactions. The average value of UK companies acquired by overseas companies (inward M&A) was £17.0 billion per quarter over this period compared with an average value of £15.3 billion during 2013 to 2017. Similarly, M&A between UK companies (domestic M&A) saw a notable increase in quarterly average values over the same period, increasing from an average of £3.3 billion over the quarters of 2013 to 2017 to £4.9 billion during Quarter 1 2018 to Quarter 3 2019.

Outward M&A recorded during 2013 to 2017 saw the value averaging £7.6 billion per quarter compared with £5.9 billion during Quarter 1 2018 to Quarter 3 2019.

In Quarter 4 (Oct to Dec) 2019, the numbers of M&A involving UK companies were notably lower than the average number of deals recorded during Quarter 1 2018 to Quarter 3 2019. In addition, there were notably fewer higher-valued cross-border and domestic M&A transactions that completed and are reflected in the lower average values in Quarter 4 2019 compared with Quarter 1 2018 to Quarter 3 2019.

Domestic mergers and acquisitions

Domestic mergers and acquisitions (M&A) concern UK companies acquiring other UK companies.

Inward mergers and acquisitions

Inward M&A are mergers, acquisitions and disposals of UK companies by foreign companies.

Outward mergers and acquisitions

Outward M&A are mergers, acquisitions and disposals of foreign companies abroad by UK companies.

Mergers and acquisitions transactions

Mergers and acquisitions transactions are M&A that 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.

Disinvestments (disposal transactions)

Disinvestment or disposal transaction refers to the sell-off of certain assets such as a manufacturing plant, division or product line or a disposal of the ordinary share ownership of a subsidiary company.

Transaction aggregates

Transaction aggregates are definitions of reasons why revisions to the aggregates for M&A transactions valued at £100 million and greater occur most often.

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 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 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.

Mergers and acquisitions (M&A) statistics from Quarter 1 (Jan to Mar) 2018 fully incorporate the Bureau van Dijk (BVD) Zephyr data source and methods. This new data source has increased the coverage of smaller M&A transactions. Using this source 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 quarters prior to Quarter 1 2018.

The previous M&A estimates for Quarter 1 2019, Quarter 2 (Apr to June) 2019 and Quarter 3 (July to Sept) 2019 have been revised to reflect new information received after our last publication in December 2019. The detailed revisions analysis is given in Table R1, in the accompanying dataset.

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 historical quarterly and annual periods remain unchanged.

The latest response rates for the Mergers and Acquisitions Survey reflecting transactions valued £100 million and over are shown in Table 2.

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the M&A QMI.

Revisions from the mergers and acquisitions data source

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

Revisions from respondents

Very occasionally, companies will restate the values that they have previously supplied to us.

We produce statistics on the number and value of mergers and acquisitions (M&A) transactions. This information is presented in the following way:

• transactions are only recorded in Office for National Statistics (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 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 addition, 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 sometimes necessary to suppress figures for certain items in order to avoid disclosing information about an individual business. Further information on why statistics are suppressed is available in the ONS disclosure control policy.

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.

The volatility of M&A transactions 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 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. Details of any notable M&A deals that completed in Quarter 4 (Oct to Dec) 2019 can be found in the respective sections of this bulletin.

Contextual external evidence

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 may decline. 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 commentary summarises some external evidence from the Bank of England's (BoE's) Credit Conditions Survey, agents' summary of business conditions report and the Monetary Policy Report.

The Credit Conditions Survey for Quarter 4 2019 stated that "the overall availability of credit to the corporate sector was reported to have decreased slightly in [Quarter 4 2019,] with availability for both medium and large businesses reported to have decreased but remaining unchanged for small businesses. The overall availability of credit to the corporate sector was expected to decrease slightly in [Quarter 1 2020]". The same report also stated that "lenders reported a decrease in demand for corporate lending from businesses of all sizes in [Quarter 4 2019]" and that "lenders expected demand for corporate lending in [Quarter 1 2020] to increase slightly for small businesses and to decrease for medium and large businesses".

The agents' summary of business conditions report for Quarter 4 2019 reported that "investment intentions remained depressed by slower global growth and political uncertainty. Investment intentions were soft among larger firms and exporters" and that "more projects were finishing than starting. And investment in the retail sector remained low due to weak sales". The report also stated that "demand for credit remained weak" and that "credit availability continued to be tight in some sectors". Additionally, "Banks tightened lending criteria modestly for other sectors. Small and medium-sized companies reported more caution from peer-to-peer lenders. Asset-based finance was also slightly more expensive".

The Monetary Policy Report for November 2019 (previously the Inflation report) stated that "investment by businesses has been particularly affected, falling in five of the past six quarters. The Bank's Decision Maker Panel (DMP) Survey shows that firms that are more uncertain about Brexit have made larger cuts to investment since the EU referendum ... Research using the survey suggests total business investment is around 11% lower as a result of Brexit ... Consistent with that, business investment growth has been lower in the UK than in other G7 countries since the referendum, growing by only 0.4% compared to an average of 13% elsewhere".