Big deals see value of mergers rocket.
The volume and value of UK merger and acquisition deals has rebounded during the second quarter of 2005. The value of deals increased by 154% (from pounds 3.5bn in Q1 2005 to pounds 8.9bn in Q2 2005) and the number of deals rose by 7% (from 164 in Q1 2005 to 175 in Q2 2005).
This is according to the latest statistics published today by the Office for National Statistics and analysed by Grant Thornton Corporate Finance.
For the first time ever, the number of acquisitions abroad by UK companies during the second quarter of the year (48) is less than the number of acquisitions in the UK by foreign companies (53).
The 48 acquisitions abroad by UK companies during Q2 2005 represent a drop of 70% compared to the previous quarter.
The amount is also 70% lower than the corresponding quarter in 2004. While the value of such acquisitions has rocketed by almost 100% (from pounds 3.5bn during Q1 2005 to pounds 6.9bn during Q2 2005). This is largely due to a handful of large transactions.
Paul Oldham, Grant Thornton's South Wales corporate finance partner, said, 'Accounting for over pounds 5.8bn of deal value, these substantial deals hide what appears to be a worsening performance in the average deal value performed abroad by UK companies, compared to the previous four quarters which were largely free of mega-deals.
'Broadly, with deal numbers and average values per deal reducing, foreign acquisitions appear to be less appealing to UK buyers.'
During Q2 2005 there were 53 foreign acquisitions of UK companies. This represents an increase of 10% on the previous quarter (48).
'Overall, UK M&A activity has been very resilient during the second quarter of 2005,' said Oldham.
'Despite a small rise in the number of UK M&A deals, the value of UK deals has gone through the roof.
'This can partly be explained by a couple of large scale transactions, such as Aviva's pounds 1.1bn acquisition of RAC plc, but it emphasises the fact that UK buyers will still pay good money for quality businesses.
'In terms of cross-border M&A, it is clear that the UK is still an attractive place for foreign companies to buy. However, the market is pointing to the fact that a smaller number of UK companies are willing to make the quantum leap and invest abroad. But when they do, the transactions are considered and significant and aimed at adding real strategic value.'