This week a new report from the Office of National Statistics revealed that estimates for the value of both domestic and outward mergers and acquisitions (M&A) involving UK companies increased in the first quarter (Q1) of this year compared with the final quarter (Q4) of 2019.
Domestic M&A (UK companies acquiring other UK companies) was worth £3.2 billion in Q1 2020; an increase of £0.6 billion compared with Q4 2019, and an increase of £1.1 billion on the value of Q1 2019 (£2.1 billion).
Outward M&A (UK companies acquiring foreign companies abroad) during Q1 was valued at £3.4 billion, a small increase compared with the value of £3.0 billion in the previous quarter (Q4), but a notable decrease of £4.5 billion on the value recorded in Q1 2019 (£7.9 billion).
The value of inward M&A (foreign companies abroad acquiring UK companies) in Q1 was £4.6 billion, the lowest value recorded since Q4 2017 (£3.6 billion); a notable decrease of £11.1 billion compared with Q4 2019 (£15.7 billion) and a £2.5 billion decrease on the value recorded during Q1 2019 (£7.1 billion).
There were 212 completed domestic acquisitions involving a change in majority share ownership in Q1 2020, a decrease of 17 on the number recorded in the previous quarter (229) and 32 fewer than Q1 2019 (244).
There were 78 completed outward M&A deals during Q1 2020, an increase of 20 acquisitions compared with Q4 2019 (58) but 10 fewer when compared with Q1 2019 (88).
Kirsty Sandwell, partner and national head of corporate finance at RSM, comments: ‘These figures are not particularly surprising following on from the general election in December, the clear mandate to Get Brexit Done and generally positive trading conditions at the start of 2020, but these conditions feel like a world away now.’
‘Coronavirus has descended and put the deal environment in lockdown. Q2 numbers will be in stark contrast and will mirror the huge fall off in the world’s economies. There are pockets of good news stories thanks to strong performing industries such as the tech sector. Whilst much has been written about a V shaped recovery, for the deal environment things are likely to be flatter and bumpier for a number of quarters. Businesses looking to acquire or divest will face the challenge of proving that the impact of coronavirus is behind them. As a ray of optimism, unlike 2008 once economies begin to open the deal crisis is one of confidence not capital. The billions of uninvested money within the private equity community will be the vaccine the industry needs to get going. We will need to watch this space on pricing as the months unfold.’