Dealmakers return to UK M&A market

THE TOTAL value of merger and acquisition (M&A) deals by companies in the UK in the first-quarter of this year has shot up by 63 per cent on the same period a year earlier, a new report has found.

In a return to dealmaking in Britain, the total value of M&A transactions hit £23.2bn in the first three months of this year, up from £14.2bn a year earlier, according to the report by Mergermarket and accountant PKF.

Bigger deals are also returning to the market, with the average deal size in the first quarter more than £100m compared to just £66m in the same period last year.

The number of deals has now exceeded 200 every quarter since the first three months of 2010, in sharp contrast to 2009 when quarterly deal volume peaked at 169 transactions.

Energy and financial services are the most active sectors, representing 34 per cent and 16 per cent of aggregate deal value respectively.

The biggest completed deal in the sector in the first quarter was the sale of Central Networks, a portion of electricity infrastructure in the Midlands owned by E.ON, to US firm Western Power Distribution for £4bn.

The Japanese tsunami and nuclear meltdown could also encourage more activity within the energy, renewable and clean-tech sector over the coming year, the report claims.

“Several months into 2011, it appears that the UK M&A market is finally emerging from its protracted flat period,” said corporate finance specialist at PKF, Hugh Matthew-Jones.

Meanwhile, the Deal Drivers UK report also found the value of private equity buyouts and exits hit £6.2bn in the first three months of this year, up 38 per cent on a year earlier.

Buyout firms are also said to be gravitating toward the business services sector this year, according to the report.

“The year so far has also seen a notable spike in private equity activity and we forecast that buyout groups will remain active for the foreseeable future, particularly in the mid-market space,” added Matthew-Jones.