Foreign firms prey on British companies to exploit attractive investment environment

 
Chris Papadopoullos
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Shell's bid for BG Group is shaping up to be the biggest deal of the year (Source: Getty)

Foreign firms have had UK companies in their sights this year as the robust British economy presents them with rare opportunities for growth in a weaker global economy.

The value of inbound merger and acquisition (M&A) deals – foreign firms taking over British ones – reached $191.8bn (£126.6) in the year to the end of September, a massive jump compared with the $82.2bn over the same period in 2014, according to figures given exclusively to City A.M. by financial services giant EY.

The number of inbound deals has climbed to 511 from 462.

“As well as searching for growth, international dealmakers are being attracted to the UK for many other reasons. The UK presents an attractive environment for business investment, encouraged by factors such as falling corporation tax rates, plentiful corporate liquidity, and greater certainty around issues such as market demand and the availability and costs of finance,” Mark Gregory, EY’s chief economist told City A.M.

“All these factors combined are making the UK an attractive destination, not only for M&A but wider business investment and this is supported by the extremely positive FDI figures we have seen in the UK.”

Read more: Mergers and acquisitions defy stormy global markets

The UK has been the fastest growing economy in the G7 group of countries for two years running, official figures confirmed last week.

In contrast, growth has been weak on the continent and in major emerging markets such as China, Russia and Brazil.

This may be the reason why the number of outbound M&A deals – British firms taking over foreign ones – dropped to 544 this year compared with 778 last year.

“There is a rebalancing of corporate activity taking place in response to a changing global economy. While the long-term growth story for emerging markets remains, the pace is slowing and this is evidenced from the latest M&A data that suggests corporate activity is now being directed towards more developed economies, such as the UK,” Gregory said.

High profile takeovers of UK companies include insurer Amlin’s $5.26bn takeover by Japan’s Mitsui and the takeover of the Financial Times by Japanese media group Nikkei for $1.28bn.

If the deal goes through, Royal Dutch Shell’s $91bn bid for BG Group will be the biggest such deal so far this year.

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