Mergers and Acquisitions Involving UK Companies: Q1 Jan to Mar 2015

Data for the following cross-border acquisition will be included in the next M&A quarterly estimates for quarter 2 (Apr to Jun) 2015.

Aviva Plc of UK acquired Friends Life Group Ltd of Guernsey.

Global merger, acquisitions and disposals activity is often driven by the availability of credit and company profits, as well as a sense of confidence in the economic outlook. The majority of large M&A transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the 2008-09 economic downturn, M&A activity declines. On the other hand, the process of completing an M&A transaction takes time and sometimes there may be a lag between improving economic conditions and any quarter-on-quarter increase in M&A activity.

The Bank of England’s (BoE) April 2015 Agents’ Summary of Business Conditions reported that corporate credit conditions had improved. Access to finance had also improved slightly for small firms, but difficulties in borrowing from banks were still reported. In this same report, business investment intentions were reported to have edged higher in recent months and were consistent with modest spending growth in the year ahead. However, it was also stated that uncertainty ahead of the general election had unsettled some firms.

The BoE Credit Conditions Survey for Q1 2015 reported that credit availability for small and medium sized businesses was unchanged in Q1 2015, but had increased for large companies with an annual turnover of £25 million.

Thomson Reuters, in its Mergers and Acquisitions Review - First Quarter 2015, stated the number of announced worldwide M&A had fallen by 21% during Q1 2015 compared with Q4 2014.

Notes for how our statistics compare with external evidence

1. Throughout this release Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

1. Overview of Mergers and Acquisitions:

   The M&A estimates are analysed and produced to measure investment data for:

   Investment in the UK by UK companies (Domestic investment).

   Investment in the UK by foreign companies (Inward investment).

   Investment in foreign companies by UK companies (Outward investment).

   Within ONS, Mergers and Acquisitions (M&A) data are essential for producing the National Accounts. The survey results form important components of the UK Balance of Payments and Financial Accounts and are vital in the measurement of the financial and non-financial business sector accounts. M&A data is used in the compilation of the estimates for Foreign Direct Investment and additionally used by other government departments when preparing ministerial briefings. For example, HM Treasury, the Department for Business, Innovation and Skills, UK Trade & Investment and HM Revenue and Customs. The M&A data estimates are also used by foreign embassies, economists and academics for research purposes and for periodic statistical comparisons.

2. Your views matter

   We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. Please contact us via email: m&a@ons.gov.uk or telephone Michael Hardie on +44 (0) 1633 455923.

3. Basic Quality Information

   The Quality and Methodology (300 Kb Pdf) Information for Mergers and Acquisitions surveys report describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

4. Relevance to users

   The degree to which the statistical outputs meet users’ needs.

   Within ONS, the mergers and acquisitions data are considered to be essential for producing the National Accounts. The survey results form important components of the UK Balance of Payments and Financial Accounts and are vital in the measurement of the financial and non-financial business sector accounts.

   The Cross-Borders M&A data are used in the compilation of the estimates of Foreign Direct Investment (FDI). These data meet the needs of FDI by collecting data on all acquisitions which lead to a holding in excess of 10% of the issued share capital. These estimates then feed into the UK Balance of Payments and the 'Rest of the World' sector of the financial accounts in the National Accounts, for which there is an EU legal requirement. Individual transaction information is also used to estimate the counterpart in 'portfolio' investment flows for monthly Balance of Payments.

   The data collected are also used in updating business structures and country of ownership codes on the Inter-Departmental Business Register (IDBR). The IDBR is a comprehensive list of UK businesses that is used by government for statistical purposes.

   Elsewhere in Government, examples of departments who use the data include:

   • HM Treasury, Economic Analysis Division, where the data are used in preparing briefing and forecasting
   • Department for Business, Innovation and Skills, where direct investment data are required for ministerial briefing, parliamentary questions and in formulating trade policy
   • UK Trade & Investment, where the information is used for briefing on the extent to which the UK is successful in attracting inward investment
   • HM Revenue and Customs, where the data are used to help in forecasting company taxation

   Non-Government users include:

   • private companies which are interested in analysing country and industry data for trends by foreign firms in the UK and by UK companies abroad and also for researching corporate finance activity and for the purpose of investment banking
   • UK embassies in foreign countries, who are interested in information on specific countries and companies making acquisitions
   • private sector economists, journalists and academics who are interested in information on particular industries and particular countries for research purposes and who use the data for periodic statistical comparisons

   Feedback from users has indicated that the information received from the M&A survey has a high degree of relevance across the above user groups, meets the vast majority of user needs, and all information currently collected and published is used.

   Source of data:

   The information collected is based on reports in the financial press, specialist magazines, company and financial websites supplemented by special surveys to businesses to determine the form, value and timing of each transaction.

   If the information is not yet in the public domain, such transactions may not be reflected in the analysis. Where full information has not yet been received on the details of the acquisition or disposal, the value of the transaction indicated in the public domain is used as an interim estimate.

   The data shown in this release relate solely to mergers and acquisitions undertaken by companies: acquisitions by individuals are not included.

   This publication contains data relating mergers, demergers, acquisitions and disposals. Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals.

   ONS makes every effort to provide informative commentary on the data in this release. As part of the quality assurance process, individual businesses are contacted in an attempt to capture reasons for large period on period data movements. It can prove difficult to gather detailed reasons from some businesses to help inform the commentary. Frequently, reasons given for data movements refer to a ‘change in market conditions’ or a ‘restructure of the company’. Consequently, it’s not possible for all data movements to be fully explained.

   ONS are aware that a number of users make use of these data for modelling or forecasting purposes. In doing so, it is important that users make note of our revisions policy (see note 9 in the background notes) and that all time series are on a ‘current price’ basis, which means that the values are as they were at the time of measurement and not adjusted for inflation. Acquisitions and disposal activity can be affected by UK and global economic and political issues and therefore quarterly estimates can be volatile.

   One question often asked of the M&A release is ‘why is there a time delay between the announcement of M&A transactions in the press and the inclusion of these transactions within ONS M&A figures?’ The difference is that ONS figures record when a transactions legally completes as opposed to when the transaction has been announced in the press. The complexities surrounding the acquisitions/disposals taking place often incurs a time lag, which can vary between quarters.

5. Significant transactions

   Significant Transactions tables show the reported figures for a selection of significant transactions which occurred in the quarter, where ‘significance’ is defined as the absolute value of the deal.

   The figures shown are usually the ones available from the financial press or other sources in the public domain although occasionally, with the consent of the company, the value returned to ONS is used in the tables instead of the press reported figure. If the company’s consent cannot be obtained then the deal is excluded, however, the values are included in the aggregate tables. Occasionally, therefore, a large deal may be missing (suppressed) from the lists so it is best to regard these tables as an indication of the ranking of deals rather than a completely exhaustive listing.

   Press reported figures for M&A transactions often differ to some extent from those supplied by companies to ONS and it is the latter which are used in compiling statistical aggregates in tables 1-10. (263 Kb Excel sheet) Included in the prices quoted in the tables of significant transactions is the total published price paid for the company excluding any assumed debt where known. Deferred payments are included in the reported price even if the payment is made in a different quarter.

6. Types of transactions covered

   Mergers are acquisitions in which all or part of the payment is made in shares, such that the shareholders of the two companies become shareholders of a new, combined company group.

   Demergers are disposals where a company group divides into two or more separate companies, in such a way that the shareholders of the restructured companies remain the same, or retain the equivalent value shareholding in one of the newly independent companies. Demergers are included in the statistics within disposals.

   Acquisitions are transactions which involve one company purchasing the ordinary shares of a second company (‘target company’). A target company is usually of a smaller size than the company undertaking the purchase.

   Disposal is a term used to describe the action when a company or organisation sells or liquidates the ordinary shares of a second company (‘target company’).

   Cross-border acquisitions denote transactions where a company in one country acquires, either directly or indirectly, a controlling interest in a company in another country.

   Direct transactions are those where a company acquires a controlling interest in another company.

   Indirect transactions are those where a company uses an existing foreign subsidiary to acquire a controlling interest in a company resident in another country. The acquiring foreign intermediate company may be located in the same country in which the acquisition is being made or in a different country.

   Acquisitions within the UK by other UK companies denote mergers and acquisitions involving only UK registered companies.

   Where the acquired company was a subsidiary of another company the transaction is classified as a sale between company groups.

   The phrase ‘acquisitions in the UK by UK companies’ refer to deals where the ultimate ownership remains in the UK. This heading does not cover the total number or value of deals where a UK company is the acquirer. When a foreign company acquires a UK company through one of its existing UK subsidiaries or a UK registered special purpose vehicle that deal is shown as part of the data under ‘acquisitions in the UK by foreign companies’.

   Acquisition of independent companies

   The acquisition of an independent company means the purchase of a company in its entirety – the company itself and all of its subsidiaries.

   Acquisition of subsidiary companies

   The acquisition of a subsidiary company means the purchase of part of a company.

7. Financing

   This statistical bulletin provides details of the application of funds to effect mergers and acquisitions and the proceeds raised from disinvestments and demergers.

   For indirect foreign transactions there is the added complication of considering the movements of funds either as capital injection or in the form of loans between parent companies and their foreign subsidiaries making the acquisition. Occasionally, the foreign subsidiary obtains the funds required partly or entirely outside the UK from sources such as:

   • own resources
   • borrowing from banks and other local sources
   • share, bond and other capital or notes issued abroad

   Also, a transaction may be funded by more than 1 method.

8. Definitions of geographic areas

   Table A: Defintions of geographic and economic areas

   Europe
   EU	Austria	Belgium	Bulgaria	Croatia
   	Cyprus	Czech Republic	Denmark	Estonia
   	Finland	France	Germany	Greece
   	Hungary	Irish Republic	Italy	Latvia
   	Lithuania	Luxembourg	Malta	Netherlands
   	Poland	Portugal	Romania	Slovakia
   	Slovenia	Spain	Sweden
   Other European Countries	Albania	Andorra	Belarus	Bosnia and Herzegovina
   	Faroe Islands	Gibraltar	Iceland	Liechtenstein
   	Macedonia, the Former Yugoslav Republic of	Moldova	Montenegro	Norway
   	Russian Federation	San Marino	Serbia	Switzerland
   	Turkey	Ukraine	UK Offshore Islands (Guernsey, Jersey, other Channel Islands & Isle of Man)	Vatican City State
   The Americas
   Anguilla	Antigua & Barbuda	Argentina	Aruba	Bahamas
   Barbados	Belize	Bermuda	Bolivia	Bonaire, Sint Eustatius & Saba
   Brazil	British Virgin Islands	Canada	Cayman Islands	Chile
   Colombia	Costa Rica	Cuba	Curacao	Dominica
   Dominican Republic	Ecuador	El Salvador	Falkland Islands	Greenland
   Grenada	Guatemala	Guyana	Haiti	Honduras
   Jamaica	Mexico	Montserrat	Nicaragua	Panama
   Paraguay	Peru	St Kitts & Nevis	Saint Lucia	Sint Maarten
   St Vincent & the Grenadines	Suriname	Trinidad & Tobago	Turks & Caicos Islands	Uruguay
   US Virgin Islands	USA	Venezuela
   Asia
   Afghanistan	Armenia	Azerbaijan	Bahrain	Bangladesh
   Bhutan	Brunei Darussalam	Burma/Myanmar	Cambodia	China
   Georgia	Hong Kong	India	Indonesia	Iran
   Iraq	Israel	Japan	Jordan	Kazakhstan
   Kuwait	Kyrgyzstan	Laos	Lebanon	Macao
   Malaysia	Maldives	Mongolia	Nepal	North Korea
   Oman	Pakistan	Palestinian Territory	Philippines	Qatar
   Saudi Arabia	Singapore	South Korea	Sri Lanka	Syria
   Taiwan	Tajikistan	Thailand	Timor - Leste	Turkmenistan
   United Arab Emirates	Uzbekistan	Viet Nam	Yemen
   Australasia & Oceania
   American Samoa	Antarctica	Australia	Bouvet Island	Christmas Island
   Cocos (Keeling) Islands	Cook Islands	French Polynesia	French Southern & Antarctic Lands	Fiji
   Guam	Heard Island & Macdonald Islands	Kiribati	Marshall Islands	Micronesia, Federated States of
   Nauru	New Caledonia	New Zealand	Niue	Norfolk Island
   Northern Mariana Islands	Palau	Papua New Guinea	Pitcairn	Samoa
   Solomon Islands	South Georgia & South Sandwich Islands	Tokelau	Tonga	Tuvalu
   US Minor Outlying Islands	Vanuatu	Wallis & Futuna
   Africa
   Algeria	Angola	Benin	Botswana	British Indian Ocean Territory
   Burkina Faso	Burundi	Cameroon	Cape Verde	Central African Republic
   Chad	Comoros	Congo	Democratic Republic of the Congo (Zaire)	Djibouti
   Egypt	Equatorial Guinea	Eritrea	Ethiopia	Gabon
   Gambia	Ghana	Guinea	Guinea Bissau	Ivory Coast (Cote d'Ivoire)
   Kenya	Lesotho	Liberia	Libya	Madagascar
   Malawi	Mali	Mauritania	Mauritius	Morocco
   Mozambique	Namibia	Niger	Nigeria	Rwanda
   Sao Tome & Principe	Senegal	Seychelles	Sierra Leone	Somalia
   South Africa	South Sudan	St Helena, Ascension & Tristan da Cunha	Sudan	Swaziland
   Tanzania	Togo	Tunisia	Uganda	Zambia
   Zimbabwe
   Source: Office for National Statistics

   Download this table Table A: Defintions of geographic and economic areas

   .xls (32.8 kB)

9. Revisions

   Data for all 4 quarters of 2014 has been revised in the light of new information, and so revisions to the data for Q1, Q2, Q3 and Q4 2014 have been published in this statistical bulletin. No further revisions to data prior to Q1 2014 have been made. Therefore time series data for all quarters of 2013 and any previous historic quarterly periods remain unchanged.

   Annual data tables for 2014 are produced in conjunction with the Q4 2014 data. Revisions to the 2014 quarterly and annual figures are recalculated at Q1 2015 only. No revisions to annual data prior to 2014 have been made. Therefore time series data for previous historic annual periods remains unchanged.

   Revisions to the aggregates used in M&A principally occur for the following reasons:

   • Completion of transactions:
     On announcement of a proposed transaction an expected completion date is usually given. The publicly reported values will be allocated to the quarter of expected completion. If the transaction is ultimately completed in an earlier or later quarter, the recorded values will be reallocated to the new quarter.
   • Publicly reported values:
     Publicly reported values are initially used to compile the aggregates. These can vary considerably from the values ultimately supplied by the respondents, frequently because the assumption of debt has been included in the publicly reported value. A nominal value is applied if no publicly reported value is available. The final values used to create the aggregates are those supplied by the respondent.
   • Non-completion of transactions:
     On announcement of a proposed transaction the publicly reported value of the transaction is recorded. If the transaction does not subsequently take place the recorded value will be deleted.
   • Non-share transactions:
     On announcement of a proposed transaction it may appear that there will be transactions in the share capital of the companies involved and the publicly reported values will be recorded. If subsequent information contradicts this the recorded values will be amended or deleted.
   • Control:
     On announcement of a proposed transaction it may appear that the transaction will give the purchasing company control of the purchased company, that is, a share ownership of greater than 50%. If subsequent information contradicts this the recorded values will be amended or deleted.
   • Revisions from respondents: Very occasionally respondents revise the values that they have previously supplied to ONS. The revised values are those used to create the aggregates.

   Table B: Average Revisions over the Previous Five Quarters

   	First Published Value (Q4 2014)	Number in Latest Revised Period (Q1 2015)	Average Revision
   Number of Outward Acquisitions	26.0	35.0	2.0
   Number of Outward Disposals	3.0	4.0	0.4
   Number of Inward Acquisitions	20.0	28.0	2.4
   Number of Inward Disposals	3.0	6.0	0.6
   Number of Domestic Acquisitions	40.0	56.0	1.8
   Source: Office for National Statistics
   Notes:
   1. Quarter 4 is Oct to Dec 2014. Quarter 1 is Jan to Mar 2015.

   Download this table Table B: Average Revisions over the Previous Five Quarters

   .xls (25.1 kB)

   Table C: Average revisions over the previous five quarters

   	First Published Value (Q4 2014)	Value in Latest Revised Period (Q1 2015)	Average Revision	Average without Regard to Sign
   Value of Outward Acquisitions	11,393	11,752	71.80	71.8
   Value of Outward Disposals	1,007.00	1,323.0	64.40	64.4
   Value of Inward Acquisitions	2,658.00	3,940.0	274.4	274.4
   Value of Inward Disposals	87.0	601.0	123.8	123.8
   Value of Domestic Acquisitions	1,617.00	1,642.0	4.6	5.4
   Source: Office for National Statistics

   Download this table Table C: Average revisions over the previous five quarters

   .xls (25.6 kB)

   Analysing average revisions between provisional and final estimates can provide an indication of reliability in an initial statistic. Provisional statistics may be based on less information than is available for final statistics as they have been processed more quickly to meet the demand of customers. By looking at these average revisions it can help us determine whether revisions are being made consistently in one direction i.e. if early estimates are consistently under or overestimating the later figures. A test is subsequently performed on these average revisions to determine if they are statistically different from zero. Revisions that are not statistically significant imply that an average revision might be non-zero simply through random effects.

10. Response rates

    Table D Response Rates

    Cross-Border Mergers and Acquisitions (CBAM) Inwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period	Quarter 4 2014	Quarter 1 2015
    Response Rate (%)	81%	81%
    Cross-Border Mergers and Acquisitions (CBAM) Outwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period	Quarter 4 2014	Quarter 1 2015
    Response Rate (%)	82%	82%
    Domestic Mergers and Acquisitions (DAM)
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period	Quarter 4 2014	Quarter 1 2015
    Response Rate (%)	89%	81%
    Source: Office for National Statistics
    Notes:
    1. Previous quarter has been revised, latest quarter is provisional.
    2. Quarter 4 is Oct to Dec 2014. Quarter 1 is Jan to Mar 2015.

    Download this table Table D Response Rates

    .xls (16.9 kB)

11. Notes to tables

    The deal identification threshold was increased at Q1 2010 to a value of £1.0 million from a previous value of £0.1 million. As a consequence there is a discontinuity in the value and number of deals reported from Q1 2010 onwards compared with previous periods.

    Symbols used in the tables are:

    .. Figure suppressed to avoid disclosure of information relating to individual enterprises
    – Nil or less than half the final digit shown

    The sum of constituent items in tables may not always agree exactly with the totals shown due to rounding.

12. Disclosure

    It is sometimes necessary to suppress figures for certain items in order to avoid disclosing information about an individual business. Further information on why data are suppressed is available in the ONS Disclosure Control Policy (337 Kb Word document).

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    The UK Statistics Authority has reviewed this publication in their report: “Assessment of compliance with the Code of Practice for Official Statistics”: Statistics of International Transactions, which was published on 8 December 2011. This review recommended that the Mergers and Acquisitions estimates be designated as National Statistics, subject to ONS carrying out certain requirements. ONS met all of these requirements on 3 May 2013.

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