In the first quarter of 2017, around 700 deals were announced, compared to 900 deals in the last quarter of 2016, a sharp reduction of over 20%. Around 3700 deals were announced in the whole of 2016, a decline of around 10% compared to 2015. (Our analysis, based on data provided by BvD / Zephyr, includes all deals announced in the relevant period which involve the acquisition of a stake of 20% or more in a UK based company).
Andy Moore, Managing Director, commented: “The decline in deal volumes in 2016 and the first quarter of 2017 is not surprising, given the record volumes in 2015 and the economic and political uncertainties of 2016. Our current view on the outlook for 2017, based on the volume of deals announced in the first quarter, is that we will see a further reduction in volumes of around 10% for the year, taking deal volumes to around 3300 for the year. This is due primarily to uncertainty around Brexit.”
Despite the downturn in volumes, we have seen some major strategic acquisitions announced. We have just seen the announcement of Wood Group’s proposed £2.2bn takeover of Amec Foster Wheeler, the engineering consultancy group. In January, Tesco announced its proposed £3.7bn acquisition of Booker, taking Tesco beyond its traditional food retailing operations, and creating “the UK’s leading food business”. This deal, which is subject to CMA approval, is a significant strategic move by Tesco, consolidating a major retailer and wholesaler.
Whilst overall volumes are down, the weakness of the pound has certainly had an impact on the number of cross border deals, with 25% of all transactions in 2016 involving an international purchaser. In the first quarter of 2017, we have seen a further increase in cross-border activity, with almost 30% of deals involving an international purchaser, with US purchasers being most prevalent. Excluding private equity deals and minority investments, the proportion of deals involving an international purchaser is even higher.
Cross border deals in the quarter have included the sale of ESG, a leading provider of testing, certification and inspection services, to Socotec of France, the sale of Immediate Media, the UK’s leading and fastest-growing special interest content and platform company, to Hubert Burda Media of Germany, whilst Sumitomo Rubber Industries acquired tyre distributor, Micheldever Tyre Services from Graphite Capital for £215m. We also saw French group, Loxam, finally secure its takeover of Lavendon group plc, the powered access equipment group. We expect to see a continued high proportion of cross border deals in 2017.
Two sectors in particular which will continue to be very active are technology and healthcare. Technology deals are being driven by businesses supplying innovative cloud based solutions and cyber security solutions.
Providers of healthcare services and products are also continuing to see significant activity. Sidhil, the UK’s leading manufacturer of hospital and home healthcare beds, was acquired by US based Drive DeVilbiss Healthcare, Monica Healthcare, which manufactures fetal monitoring equipment, was acquired by GE Healthcare and occupational healthcare provider, OH Assist, acquired Working on Wellbeing.
New investments by private equity include Inflexion’s £40 million buyout of MyPolicy, one of the UK’s leading telematics insurance brokers and LDC’s £38m MBO of Fishawack, the specialist provider of scientific communications services for the pharmaceutical industry.
Frank Collins, Bracebridge Chairman, commented: “I think we will see more confidence to get deals done as the UK starts to map out its exit from the EU. Corporate acquirers have cash to invest and remain keen to make strategic acquisitions and we will continue to see a high level of cross border deals. Business owners have an excellent opportunity to achieve a successful exit at a strategic premium. But, as always, this will require careful preparation and a targeted sale process focused on the right buyers, including overseas buyers with a clear strategic intent”.