UK bags Europe’s M&A top spot with $247bn of deals in 2018 as TMT mergers grow
The UK enjoyed the highest value of M&A deals in Europe last year as telecoms and media takeovers spiked.
High value purchases like Comcast’s $39bn purchase of Sky pushed mergers involving UK companies to $247bn in 2018, data compiled by law firm Clifford Chance found.
Read more: Watchdog delays final report on Sainsbury's-Asda merger
Both domestic and US-inbound M&A transactions in the UK rose 33 per cent compared to 2017, while the EU’s other large economies, Germany and France, both saw drop-offs.
Germany's M&A activity fell two per cent and Italy's dropped six per cent, while France plunged 42 per cent year on year. Spain was a European M&A hotspot in 2018, surging 132 per cent to $113bn.
Large mergers in the UK in 2018 include turnaround specialist Melrose's £8bn purchase of engineering giant GKN and Global Infrastructure Partners’ purchase of half of the Hornsea offshore wind farm project for £4.6bn.
Marsh & McLennan's £4.3bn purchase of insurer Jardine Lloyd Thompson also pushed up the UK's activity.
The TMT sector saw the biggest growth worldwide in terms of M&A, up four per cent. Meanwhile, acquisitions in the consumer, retail and leisure space fell five per cent in 2018, while financial services slipped three per cent.
“Even as the politics of technology and telecommunications become ever more fraught and the hurdles to cross-border deal-making multiply, we do not see the TMT sector cooling any time soon,” said Anand Saha, corporate partner at Clifford Chance's technology group.
”The forces of disruption and innovation that are accelerating business lifecycles are strongest in the TMT sector, and that is sure to continue generating M&A.”
Global M&A activity has continued to grow in spite of falling GDP growth, a slowdown in China, uncertainty about Brexit and trade tensions, with Bloomberg recording the strongest start to the year since 2000 in terms of deal value.
Significant shifts last year include a 222 per cent increase in outbound M&A from the Asia-Pacific region into Europe, spearheaded by China and Japan.
This included two of the three largest cross-border deals of the year – Japanese drugs giant Takeda’s £46bn acquisition of Irish pharmaceuticals firm Shire and Chinese state-owned power corporation Three Gorges buying Energias de Portugal for $10bn.
In total, M&A values were up in all major regions, with the largest increases in North America (14 per cent), Europe (17 per cent) and Middle East/Africa (10 per cent).
Clifford Chance also identified the central role played by IP in many of biggest deals of the year, proving to be "flexible and portable" but also challenging for many companies.
This includes Coca-Cola’s £3.9bn acquisition of Whitbread's Costa coffee chain, which was driven by brand value.
The report cited the £1.7bn merger of banking group CYBG and Virgin Money as another IP-driven transaction.
Read more: US-China trade war greater threat to M&A deals than Brexit, survey finds
Ling Ho, Clifford Chance IP partner in Hong Kong, said: “We are seeing more tactical ways of mobilising IP to engineer, structure and control a deal. Putting pressure on a business to get and test the best price, or take pole position in a competitive sale, can be a highly effective strategy.”
The law firm also noted the renewed appeal among many companies of real assets offering predictable returns, including infrastructure, energy and real estate.