Latest UK Domestic M&A Activity

The Office for National Statistics (ONS) has published new figures that give an interesting insight into the scale of recent merger and acquisition (M&A) activity involving UK companies in Q1 (January to March) 2018.

The ONS figures relate to transactions that result in a change of ultimate control of the target company and have a value of £1 million or more.

Looking at domestic UK M&A activity in particular, the ONS found that the total value over the quarter was higher than the previous quarter. Domestic M&A deals totalled £5.9 billion in Q1 2018 compared with £5.2 billion in Q4 2017, which is a rise of 13%. The value of these deals was also £2.6 billion greater than that reported in the same quarter a year ago (£3.3 billion).

This latest increase in the value of domestic M&A deals apparently continues a general upward trend in activity taking place since Quarter 4 2016. The rise in value during the latest quarter occurred alongside a relatively larger increase in the number of these deals, which increased from 54 in Q4 2017 to 88 in Q1 2018 and is also similar to the number of acquisitions that took place in the same quarter of 2017 (97).

The ONS highlights that M&A activity can be driven by the availability of credit and so when credit conditions deteriorate M&A activity declines.

It referred to the Bank of England’s Agents’ Summary of Business Conditions report for May 2018, which stated that: “corporate demand for credit remained subdued, reflecting strong cash balances and/or heightened uncertainty. There had been demand for finance to support M&A activity, and some firms had undertaken pre-emptive refinancing ahead of Brexit. Supply of credit had tightened slightly for small firms. Investor demand in commercial real estate had continued and investment intentions remained modest, reflecting continued uncertainty around Brexit.”

It also made reference to the Bank of England’s Credit Conditions Survey for Q1 2018, which reported that: ‘’the overall availability of credit to the corporate sector was reported to have been unchanged again in Q1, with no change expected in Q2 and that lenders reported no change in demand for corporate lending from businesses of all sizes. Lenders expected an increase in demand from medium-sized business alongside a slight increase in demand from large businesses in Q2, while demand from small businesses was expected to remain unchanged.”

Contains public sector information licensed under the Open Government Licence v3.0.

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