Foreign firms boost cash to buy UK peers

THE amount of money spent by overseas firms on acquiring UK companies surged in the fourth quarter of last year to £13.8bn from £4bn in the previous three months, official data showed yesterday.

Figures from the Office for National Statistics showed however that the number of transactions had remained broadly unchanged,

Significant acquisitions of UK?firms in the fourth quarter included BlackRock’s purchase of Barclays Global Investors, Friends Provident’s buyout by Resolution and the disposal and acquisition of Gatwick Airport.

In contrast, the amount that UK companies spent on acquiring foreign companies fell to £0.9bn, the lowest since ONS records began in 1987.

A weaker sterling has made UK companies financially more attractive to overseas companies considering takeovers.

Separate data published yesterday by commercial law firm EMW Picton Howell showed that the success rate of M&A offers was at its highest in more than two years as appetite among bidders revives. As much as 85 per cent of all takeover approaches concluded in successful deals in the fourth quarter of 2009.

Teja Picton Howell, principal of EMW Picton Howell, said: “The M&A market has undergone a complete sea change – buyers are now willing to keep increasing their offers to ensure their offer gets approved.”

He added that as the economy moves out of recession, more companies are going to come under pressure to deliver earnings growth but with the economy still weak, many companies will decide that only M&A can deliver the boost to earnings. Better visibility over their own earnings has meant that bidders are willing to stretch their own finances to see deals succeed.

However, only the largest companies are considering taking on more debt to fund deals. Picton-Howell said: “Bank funding for small and medium size M&A deals is still in short supply and only the largest companies are able to tap the bond markets. If the bid activity surrounding VT Group and Mouchel is any reflection of the broader market, there are more deals to come.”