International dealmakers have set their sights on British firms this year with the UK now the top target in Europe for inbound and domestic investment, research today reveals.
The UK has risen six places year-on-year to third globally as investors look to scoop up UK firms amid a period of falling valuations and market turbulence, according to research published today by the Mergers and Acquisitions Research Centre (MARC) at Bayes Business School (formerly Cass).
The US and Singapore topped the list globally, but the UK has leapfrogged the Netherlands and Germany to become the most attractive European country for inbound and domestic investment, the research found.
Lead author of the new report by Dr Naaguesh Appadu, research fellow at Bayes, said the UK had bucked gloomy post-Brexit predictions for inward investment but warned of a coming slowdown this year.
“Post Brexit, we expected UK firms to be more appealing for takeovers, due to low interest rates and access to capital,” he told City A.M.
“With the geopolitical risk which has given rise to high inflation and a rise in interest rates, we expect the cost of capital to increase. Therefore, I would expect M&A activities to be significantly lower than last year.”
Legal experts have said that the tumult of Brexit has depressed valuations of UK firms and played their part in boosting the appeal of UK plc to bargain hunting investors.
“I think it is fair to say that UK stock market valuations are down and therefore that gives greater opportunity for potential buyers,” a top M&A lawyer told City A.M. recently.
The findings come amid a slowdown in M&A as turbulent markets and soaring inflation put the stoppers on a frenzied period of dealmaking that reached its zenith last year.
Foreign acquisition value in the UK was estimated at £11.2bn in the first quarter of 2022, a considerable drop of £5.1bn lower versus the previous quarter’s £16.3bn, according to figures from the office for national statistics.
New figures from deals data firm Refinitive yesterday revealed a global slump in M&A in July, with July recording the lowest M&A total in 26 months.
M&A declined 28 per cent compared to the all-time high of $3.2tn recorded during the same period last year.
Deals totalling $201bn were announced during the month of July 2022, down 62 per cent compared to July 2021 and marking the lowest monthly total in 26 months.