Value of acquisitions of UK private companies up 50% in one year

Publications that covered this story include Sunday Telegraph, 7 April, and City AM, 8 April.

  • Private company M&A sees faster recovery than listed deals
  • Weak pound enables US corporates to snap up British firms

The value of mergers and acquisitions targeting private companies has increased 50% in one year, up by £6.1 billion to £18.2 billion.*

Last year saw a return to pre-financial crisis levels, just below the £19.5 billion worth of acquisitions of private companies in the year leading up to the collapse of Lehman Brothers.**

Private company M&A market has recovered far faster and further than listed company deals, because lack of appetite for UK IPOs has left many UK private company shareholders looking for alternative exits.  Larger companies are also increasingly keen to make acquisitions because they are finding it difficult to achieve significant organic growth.

In particular, a weak pound has enabled major US corporates to target smaller UK companies, with US companies making seven of the 20 largest acquisitions of UK private companies during the year.

Laurence Sacker, corporate finance partner, says: “Whilst the figures are extremely promising, referring to this rise as a “boom” could be an exaggeration. In fact, what we are seeing is a return to normal activity, as the value of M&A deals has started to come back up to the level it was at before the financial crisis with many long-delayed potential transactions finally taking place.”

“Increasingly, businesses that have weathered the recession are buying smaller competitors. This is particularly common amongst listed companies who may be subject to shareholder pressure to deliver growth.”

UHY Hacker Young point out that while it remains very difficult to gain acquisition finance from the banks, many businesses have turned to acquisitions as a better way to utilise significant cash reserves built up in the last few years which are depreciating in value due to low interest rates.

Laurence says: “The increase in the volume of mergers and acquisitions taking place is not because there is new money being lent. Rather, with interest rates so low, companies are putting the cash on their balance sheets to work by making acquisitions instead.”

“Many companies also feel that they are able to do the kinds of deals that have long been on their wish list at an attractive price, and because they are not funding the transactions through debt, that’s making them even more affordable.”

resizedimage500268-value-of-private-MA-deals

* Year ending 31 July 2012

** Year ending 31st July 2008