Smaller Transactions Dominant in UK’s M&A Market

Small transactions of under £10m dominated the UK’s equity capital markets (ECM) and merger and acquisitions (M&A) market in the first quarter of 2013, increasing by 6.3% from 319 in Q112 to 357 deals in Q113, according to Experian.

The UK credit agency said that the increase can largely be attributed to a substantial upturn in the volume of smaller scale equity fundraising from UK public companies, which increased transactions from 116 worth £225m in Q112 to 225 worth £334m in Q113.

The total number of UK M&A and ECM transactions recorded in Q113, however, fell by 14.2%: from 1,239 transactions in Q112 to 1,063 in Q113. 

Overall value figures were also down when compared to Q112, with £40.5bn worth of transactions announced in Q113, down by almost 50% from £80.6bn in Q112, with fewer very large deals so far this year. 

Only five deals worth more than £1bn were announced during Q113, compared with nine in Q112. The largest of these deals saw US cable television group Liberty Global agree to purchase Virgin Media in a deal worth approximately £15bn.

In addition, the level of mid-market (£10m to £100m) and large (£100m +) deals dropped during the first quarter, by 37.8% and 20.8% respectively. 

The UK’s financial sector was most active in terms of M&A activity in Q113, accounting for just under 30% of deals by target industry. The largest transaction in this segment was the sale of HSBC Panama to Colombia’s Bancolombia SA for £1.4bn. Professional and business activities (20% of deals) and IT (10.9%) were the next most active sectors as the SME market continued to drive deal activity in the UK.

The international picture

There was a British element in more than half (51.3%) of all European transactions in Q113, up from 44.7% in Q112, and in terms of value the UK contributed almost 40% of the European total.  This is largely due to the fall in the number of European-led transactions as UK-based transactions remained relatively steady.

Despite the overall fall in M&A volumes involving UK firms, the UK market has performed relatively well internationally during Q113 in comparison with its neighbours, and continues to be the principal driver of deal volume in Europe.

Elsewhere, deals in the Asia-Pacific region were down by 32.6% in volume and by 37.5% in value. In the US, activity dropped by just under 27.7%, although the total of transactions increased by 35.4%.

“Two thousand and twelve was a busy year with high value, top level corporate transactions characterising deal-making in the UK,” said Wendy Driver, business development manager at Experian UK&I.

“The first quarter of 2013 has seen smaller transactions dominate as SMEs continue to strive for growth with brisk activity in the professional services and IT sectors.  Despite the low deal volumes in the UK market so far this year, the UK has played a key role in more than half of all European deal activity in Q1, which is encouraging as it indicates the appetite for deal making remains strong.”

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