Businesses pushed ahead with billions of dollars’ worth of mergers and acquisitions (M&A) yesterday, unperturbed by recent volatility that has shaken global markets.
Deals involving UK firms jumped past the $400bn (£260bn) mark for the year to date as takeover Tuesday gripped the City.
PaddyPower and Betfair agreed a £6bn merger; Cinven revealed its £2.3bn sale of UK-based AMCo; and Amlin became the latest insurer to be snapped up, with Japan’s Mitsui Sumitomo splashing out £3.5bn.
The total value of deals involving UK firms, both as target and acquirer, has hit $403bn in the year to date, according to data from Dealogic – its highest level at this point in the year since 2007.
And it wasn’t just British firms getting stuck in yesterday. As part of a global wave of M&A activity, there was also Li Ka-shing’s $12bn Power Assets deal in Hong Kong, and Australia’s Woodside Petroleum’s $8bn offer for smaller rival Oil Search. Meanwhile, US investment giant Blackstone will spent $6bn on Strategic Hotels.
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As evidenced by Nikkei’s takeover of the Financial Times newspaper group last month, Japanese companies have been keen on UK businesses this year, spending $11bn – a record high – on 25 British targets.
Yesterday, Mitsui Sumitomo paid an eye-catching 36 per cent premium in a £3.5bn acquisition of insurer Amlin.
Peter Gray of Cavendish Corporate Finance, said: “Cash-rich Japanese companies have clearly opted for mergers and acquisitions as a response to a slowed domestic market with limited growth opportunities.”
While Gray points to Zurich’s recent deal with RSA as just one example of the extremely acquisitive nature of the current global insurance sector, Panmure Gordon’s market guru David Buik told City A.M. he expected to see more market activity surrounding media, drugs and telecoms.
“This isn’t really a surprise. All the main indices around the western world are really striving to deliver growth. The Nasdaq, the Dax, the Cac 40, they’re pretty rich now. Sentiment is there and we will see a lot more of this to come,” Buik said.
“This has been in the pipeline, it is a fundamental. Turmoil in the markets hasn’t dampened that sentiment for growth, this has been a long time coming. Investors are pretty cynical about buy-backs, so what's left? To secure greater market share and cutting costs, which is achieved through M&A.”
Global M&A was worth $3.2 trillion as of yesterday, according to Dealogic’s figures – close to the record of $3.4 trillion at this point in 2007.