 UK Mergers and Acquisitions are slowly getting back on track
Deal volumes steady, while valuations fluctuated
27 January 2010: The UK M&A market pulled itself back from the brink in 2009 following the near melt-down of the financial services industry at the end of 2008, says a new study conducted for PKF Accountants & business advisers.
The PKF report, Deal Drivers UK, produced in association with mergermarket, highlighted clear signs of recovery in the third and fourth quarters of 2009 as a number of businesses emerged from a period of internal evaluation and strategic repositioning and looked forward to acquisitions as a catalyst for growth.
The last quarter of 2008 saw total deal values of £44.5bn – which was largely as a result of the high-profile government bail-outs. In the first quarter of 2009, deal values were down to £13bn and down again in the second quarter to £8.3bn. However, in the final quarter of 2009, values were back up at a healthy £48.2bn – although again, government bail-outs should be taken into account when analysing the figures.
The top ten deals table over the course of the year is dominated by bail-out transactions: HM Treasury paid £5.3bn for a 29.79% stake in Royal Bank of Scotland (RBS) in January and invested a further £25bn towards the end of year which made this the largest deal of 2009.
In the private equity market the deal making environment was relatively subdued throughout the year, but did also pick up in the fourth quarter. Large cap deals were largely put on hold, but the final quarter did see Global Infrastructure Partners move to acquire Gatwick Airport from BAA for a consideration of £1.46bn – the largest private equity related transaction of the year.
The level of distressed-driven deal making in the wider UK M&A market was less pronounced than predicted six months ago. So far, many lenders have been willing to renegotiate terms, rather than pushing companies into a sale or insolvency.
A further interesting feature of the deal landscape over 2009 is the noticeable lack of vendors and acquirers from emerging markets such as China and India. In a discussion on cross-border M&A, PKF partners and directors highlighted that in these times of uncertainty, UK buyers have tended to retreat into markets of which they have a strong understanding such as Western Europe and the US. Buyers from emerging markets, whilst still visible, seem to have found it more difficult to complete transactions.
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 | Hugh Mathew-Jones, Head of Corporate Finance at PKF commented: “Over the course of 2009, we can see that UK M&A gradually emerged from the depths it had plunged to at the end of 2008. Deal volumes were stable throughout the year, but valuations fluctuated. The second quarter saw valuations nose-dive to £8.3bn, but in the final quarter this had risen back to a healthier £48.2bn which bodes well for 2010.
“Looking forward into this year, deal makers are expressing ever more confidence in the market’s recovery and, while there are still challenges facing UK-based businesses, the market is clearly on the road to recovery.” |
The UK Hotels and Leisure space was affected by the downturn, but the impact was not as stark as in some sectors. There were 46 deals, with a total value of £1.3bn, announced over the year. Looking forward, there are positive signs for 2010 as confidence increased towards the end of 2009. This was reflected in the jump in deal value in the final quarter: it hovered around £200m for the first three quarters, but jumped to £500m in the final quarter.
The UK Food sector followed a similar pattern with relatively subdued activity in the first three quarters of the year, but increased activity in the final quarter. The Kraft Foods bid for Cadbury, now accepted, would have been the largest deal of the year, excluding government bail-outs, had it gone through in December.
PKF commissioned mergermarket to explore the health of UK M&A across five key industry sectors – Hotels & Leisure, Business Services, Food, Real Estate and Manufacturing. mergermarket also interviewed PKF’s leading Corporate Finance partners across the UK’s six main regions – South East, South West & Wales, Midlands, East Anglia, North and Scotland - for their views on regional activity. The sixth edition of Deal Drivers UK looks at deal volumes and values in the UK over the last six months of 2009.
Copies of the 40 page Deal Drivers UK report can be downloaded from www.pkf.co.uk/dealdrivers
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Further press information or to arrange an interview:
Jane Murray, PR, Tel: 020 7065 0135 jane.murray@uk.pkf.com
Notes to Editors:
1. Deal Drivers UK is a study of UK M&A activity. PKF Accountants & business advisers commissioned mergermarkets’ research and editorial staff to explore the health of UK M&A across five key industry sectors – Hotels & Leisure, Business Services, Food, Real Estate and Manufacturing. mergermarket was also given access to PKF’s leading Corporate Finance partners across the UK’s six main regions. The data in this sixth edition looks at deal volumes and deal values in the UK in the last six months of 2009.
2. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
3. mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service with an unrivalled network of dedicated M&A journalists based in 62 locations across the Americas, Europe, Asia-Pacific, the Middle-East and Africa. Unlike any other service of its kind, mergermarket specialises in providing forward-looking origination and deal flow opportunities integrated with a comprehensive deals database – resulting in real revenues for clients. Visit www.mergermarket.com.
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