M&A activity ‘subdued’, new figures show

Latest official figures show that mergers and acquisitions (M&A) involving UK businesses totalled £4.7 billion in the second quarter of 2014.

The Office for National Statistics (ONS) figures – which track transactions where the companies involved have a value of £1 million or more are involved – revealed that there were 37 domestic deals between UK companies (total value £1.6 billion). There were also 19 transactions in which overseas businesses acquired UK companies (£1.5 billion) and 17 where UK firms bought businesses abroad (£2.1 billion).

The ONS described activity in the quarter as “subdued”, with the total number of transactions 26 per cent down on the previous quarter and 36 per cent down on the same period in 2013.

But it added: “One reason for this apparent flat trend in the numbers of acquisitions seen between Q1 and Q2 2014 may be because this is a fundamental period of ‘catch up’ for M&A activity. Having seen signs of global economic growth, company CEOs may only recently have regained the confidence to take forward to legal completion acquisitions that had previously been put on hold.

“The majority of large M&A transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the economic downturn, M&A activity declined.

“On the other hand, the process of completing an 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.”

Recent indicators suggest that the outlook for the UK economy remains positive – it was confirmed in July that the economy had grown to above levels seen in the first quarter of 2008, before the financial crisis began – which may encourage more businesses to move forward with acquisition, merger or disposal plans.

Palmers can provide commercially-minded legal advice on all aspects of corporate transactions, including management buyouts, management buy-ins, share buybacks, business and company sales, purchases and mergers, debt funding, equity finance and venture capital. For more information, please visit our website or contact BJ Chong.