After a slow start to the year UK M&A has bounced back after a surge in mega deals saw activity soar 80 per cent.
M&A with UK involvement has totalled £429.8bn so far this year, 80 per cent more than the value recorded in 2019 according to research by data provider Refinitiv.
A staggering 21 mega deals have been announced so far this year, more than double the number last year.
It is particularly impressive given activity came to a near standstill after the first lockdown, with activity resuming only once lockdown restrictions eased over the summer.
Indeed the actual number of deals with UK involvement has declined 22 per cent to the lowest level since 2014.
But there have been encouraging signs since with the value of deals with UK involvement in the fourth quarter reaching its highest quarterly total in five years.
Additionally the UK has been the third most targeted country globally this year, after the US and China, accounting for eight per cent of global M&A so far this year.
The value of deals including a UK target is 38 per cent more than the value recorded last year, at £208.6bn.
S&P Global’s $43.5bn buyout of IHS Markit IN X is the largest acquisition since the Occidental/Andarko deal in the first quarter of 2019.
There has also been a slow trickle of distressed M&A activity in the wake of restructurings and insolvencies.
UK M&A rally will continue into 2021
The tide of activity seen in the latter half of 2020 is set to continue well into 2021 it seems.
“Many businesses have been waiting for a few years now for the perfect opportunity to bring in investment or sell,” said Jonathan Boyers, head of M&A at KPMG UK. “The pandemic has focused minds on the here-and-now for those who might otherwise have delayed their plans until further in the future.”
And private equity is quietly waiting in the wings. A recent survey by Lincoln International found 88 per cent of private equity investors indicated deploying capital was their top priority for 2021.
Private equity has record levels of dry powder it is itching to deploy which Boyers predicts will mean many will consider M&A, management buyouts and bringing on board investors during this period.
Despite encouraging signs in the second half of the year, a slower than expected economic recovery and Brexit uncertainty could put pause to the rally next year.
“Rising Covid infection rates and fears that a return to tighter virus control restrictions will choke economic recovery will cause concern for companies engaging in deal making in the UK,” said Lucille Jones, analyst at Refinitiv Deals Intelligence. “And… there’s Brexit. The lack of clarity surrounding the UK’s departure from the EU remains a concern.”