UK mergers and acquisitions hit a new record last year as companies defend themselves from foreign takeovers

Lucy White
The UK's consumer sector saw a surge in deals as it adapts to pressures

The number of merger and acquisition (M&A) deals in the UK hit a record high last year, despite growing dissatisfaction from the business community with the pace and vagueness of the Brexit negotiations.

The number of deals where a UK company was the target escalated to 1,543 in 2017 from 1,493 the year before, according to statistics released today by Mergermarket. Their combined value, meanwhile, rose more than 17 per cent to £157.4bn – the second-highest total since the financial crisis.

China Investment Corporation grabbed the title for the largest foreign takeover in the UK, with its bid for logistics firm Logicor Europe. The £10.7bn deal was also the biggest Chinese acquisition in the country on Mergermarket record.

Read more: British firms set for M&A buying spree on scale not seen for a decade

But foreign interest such as this could in fact be driving a horde of smaller domestic deals.

"With more UK-based companies now more susceptible to foreign takeovers than in previous years as a result of Brexit, the last 12 months saw a clear rise in defensive domestic consolidation across a number of sectors," said Mergermarket's Jonathan Klonowski.

Domestic M&A accounted for 37.2 per cent of overall UK dealmaking by value, the largest share since 2010.

Read more: Global M&A activity to hit cycle high of $3.2 trillion next year

Five of the largest 10 deals involving a UK company were domestic, such as the £4.2bn tie-up between GVC and Ladbrokes Coral and the mega merger of Standard Life and Aberdeen Asset Management.

But UK activity wasn't entirely internally focused, as two blockbuster deals pushed outbound M&A to £124.7bn, more than double last year's total. Namely, these were British American Tobacco’s takeover of Reynolds American and Reckitt Benckiser’s acquisition of Mead Johnson.

The sectors grabbing interest

Despite its generally less flashy nature, the business services sector was the most targeted in the UK as nine deals took place above the £1bn mark. The payment processing niche especially ensnared buyers, as both Worldpay and Paysafe were acquired by high-profile buyers for even more notable price tags.

Pressures in the consumer sector also seem to have led to a surge in dealmaking. Inflation is high and wages are generally stagnant, meaning businesses are looking to consolidate to stay afloat.

"The coming 12 months are pivotal for the UK, and will shape how the country functions for generations to come," the Mergermarket report stated. "With many firms already pushing ahead with plans to adapt accordingly, 2018 should see a similar pattern as rivals react and the country’s path becomes clearer."

Read more: Insurance megadeals driving surge in M&A deal value