Mergers and acquisitions involving UK companies: April to June 2017

• During the second quarter (Apr to Jun) of 2017 the value of successful mergers and acquisitions (M&A) involving UK companies saw a notable increase when compared with the values seen in the first Quarter 1 ( Jan to Mar) of 2017.

• There were a total of 155 successfully domestic and cross-border acquisitions and disposals involving UK companies worth £30.0 billion in Quarter 2 2017, compared with 214 transactions valued at £16.5 billion in Quarter 1 2017.

• The increase total activity was driven by acquisitions made abroad by UK companies; there were 24 such transactions in Quarter 2 2017 worth £18.3 billion. This was the largest value for outward M&A transactions recorded since Quarter 1 2011 (£19.8 billion), which reflected one high-value transaction.

• There were 44 completed inward M&A transactions (foreign companies acquiring UK companies) in Quarter 2 2017, worth £2.9 billion. This was down in terms of both number and value compared with Quarter 1 2017 (70 acquisitions valued at £9.5 billion).

• Provisional estimates show that while the value of completed inward mergers and acquisitions in Quarter 2 2017 was £2.9 billion, the value of disposals was £3.8 billion – marking the first period of recorded net disposals of UK companies by foreign companies, since Quarter 4 (Oct to Dec) 2002.

• There were 66 successful domestic acquisitions (UK companies acquiring other UK companies) during Quarter 2 2017 worth £4.0 billion, down in both number and value terms compared with Quarter 1 2017 (94 acquisitions valued at £3.2 billion).

This release covers mergers and acquisitions (M&A) transactions that have been successfully completed, result in a change of ultimate control of the target company and have a value of £1 million or more. Information on the number and value of transactions are reported, in addition to whether transactions are acquisitions or disposals.

Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals.

The quarterly numbers and value of M&A activity are prone to large quarter-on-quarter movements, as these data relate to specific “one-off” only transactions. For example, one quarter can be heavily impacted by one large transaction. As such, it may be more appropriate to analyse trends over time.

Data published in this bulletin for Quarter 1 (Jan to Mar) 2017 have been revised in light of new information. No further revisions to data prior to Quarter 1 2017 have been made, therefore time series data for all quarters of 2016 and any previous historic quarterly periods remain unchanged.

Source of data

The information presented in this bulletin is based on reports in the financial press, specialist magazines, company and financial websites. Businesses identified as having engaged in M&A activity are issued statutory surveys 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 to mergers, demergers, acquisitions and disposals. Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals.

We make 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 discover 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 is not possible for all data movements to be fully explained.

We 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 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 M&A figures record when a transaction legally completes as opposed to when the transaction has been announced in the press. The complexities surrounding the acquisitions and disposals taking place often incurs a time lag, which can vary between quarters.

There were a total of 155 successful domestic and cross-border M&A involving UK companies in Quarter 2 2017, valued at approximately £30.0 billion. This total includes 24 outward acquisitions valued at £18.3 billion; 6 outward disposals valued at £1.0 billion; 44 inward acquisitions valued at £2.9 billion; 15 inward disposals valued £3.8 billion; and 66 domestic acquisitions valued at £4.0 billion.

During Quarter 2 (Apr to Jun) 2017, the provisional estimates for the total number of successful domestic and cross-border mergers and acquisitions (M&A) involving UK companies saw a notably lower level of activity when compared with Quarter 1 (Jan to Mar) 2017 and also with the same quarter of the previous year, Quarter 2 2016 (Figure 1).

The value of successfully completed acquisitions of foreign companies by UK companies (outward M&A) recorded for Quarter 2 2017 was unusually high. The data included one high-value and publically announced transaction which successfully completed.

Recent M&A statistics can be put into context by comparing the most recent quarter with average quarterly M&A over 5-year intervals since 1997 (Table 1).

Average outward M&A

The quarterly average number of outward acquisitions involving a change in majority share ownership during 1997 to 2001 was reported as 128 completed acquisitions, with an average value of £160 million per transaction. The average number of outward acquisitions fell over the next 10 years, falling to a quarterly average of 67 outward acquisitions, with an average value of £119 million by the end of 2011. Between 2012 and 2016, the average number of outward acquisitions fell further, to a quarterly average of 30 transactions, with the average value per transaction increasing to £141 million.

Overall, during 1997 to 2016 (20-year interval), the average number of outward acquisitions was 76, with an average value of £130 million per transaction.

During Quarter 2 (Apr to Jun) 2017 the average value of the 24 completed outward acquisitions was £762 million. One large successful acquisition completed by a multi-national consumer goods company contributed to this notable high average value.

Average inward M&A

Between 1997 and 2001, the quarterly average number of completed inward acquisitions was 54, with an average value of £183 million per transaction. The following 10 years (2002 to 2011) experienced relatively stable levels of M&A activity. However, between 2012 and 2016, the quarterly average number of inward acquisitions fell to 39, with an average value per transaction of £365 million. The increase in the average value seen during the 2012 through to 2016 is influenced by a few successful acquisitions valued greater than £1,000 million in 2016.

The 20-year interval (1997 to 2016) saw an average of 49 completed inward acquisitions that involved a change of majority share ownership. The average value of the 49 transactions was shown as £230 million per transaction.

There were 44 completed inward acquisitions in Quarter 2 (Apr to Jun) 2017 with an average value per transaction of £66 million.

Average domestic M&A

During the 15-year period between 1997 and 2011, the average number of domestic acquisitions involving a change in majority share ownership saw a downward trend. The quarterly average number of domestic M&A for 1997 to 2001 was 136, with an average value of £80 million. During 2002 to 2006, domestic M&A saw an increase in the quarterly average number of transactions (164); however, the quarterly average value per transaction fell to £39 million. The following 5-year interval (2007 to 2011) saw the average quarterly number of domestic M&A fall to 121, with an average value per transaction of £40 million. Then during the interval 2012 to 2016, the average value of the 67 completed domestic acquisitions was £37 million.

Between 1997 and 2016 the average value of domestic M&A per transaction was recorded as £52 million.

In Quarter 2 (Apr to Jun) 2017, there were 66 successful domestic acquisitions, with an average value of approximately £61 million per transaction.

The strong rise in the value of outward mergers and acquisitions (M&A) activity is largely attributable to one exceptionally high-value transaction.

During Quarter 2 (Apr to June) 2017, the provisional estimates for M&A of foreign companies made by UK companies (outward M&A), involving a change of majority ownership, saw a decline in the number but a strong increase in the value (Figure 2).

There were 24 outward M&A transactions in Quarter 2 2017 worth £18.3 billion. While the number of transactions fell from the 36 recorded in Quarter 1 (Jan to Mar) 2017, the value of transactions was notably higher than the £2.1 billion recorded in the previous quarter.

Similarly, outward M&A activity compared with the same quarter a year ago shows a decrease in number terms from 35, but an increase in value compared with the £2.0 billion recorded in Quarter 2 2016.

The notable increase in value of outward acquisitions during Quarter 2 2017 can be largely explained by the completion of one high-value acquisition, which involved Reckitt Benckiser Group Plc of the UK, a multi-national consumer goods company, who acquired Mead Johnson Nutrition Company of the USA.

In Quarter 2 2017, there were six completed outward disposals recording a total value of £1.0 billion.

Other notable successful outward acquisitions which completed during Quarter 2 (Apr to Jun) 2017

Chesnara Plc of the UK acquired Legal & General Nederland Levensverzekering Maatschappij NV of the Netherlands.

Legal & General Group Plc of the UK disposed of Legal & General Nederland of the Netherlands.

Ashtead Group Plc of the UK acquired Pride Equipment Corporation of the USA.

Smiths Group Plc of the UK acquired Morpho Detection LLC and Morpho Detection Int LLC.

Spirax-Sarco Engineering Plc of the UK acquired Gestra AG of Germany.

Electra Private Equity Plc of the UK disposed of RISI of the USA.

Rentokil Initial Plc of the UK disposed of Rentokil Initial Business of Luxembourg.

Hotelbeds Group of the UK acquired Tourico Holidays of the USA.

Inward M&A has seen a slowdown in activity in both value and number

During Quarter 2 (Apr to Jun) 2017, the estimates for the number of successful inward mergers and acquisitions (M&A) of UK companies made by foreign companies, involving a change of majority ownership, continued to see low levels of activity compared with the values recorded in 2016 (Figure 3).

There were 44 inward M&A transactions worth £2.9 billion in Quarter 2 2017, which reflected a slowdown in activity when compared with Quarter 1 (Jan to Mar) 2017 (70 transactions worth £9.5 billion).

Inward M&A activity recorded during Quarter 2 2017 was also lower when compared with the exceptionally high numbers and values recorded during 2016, which were explained by a number of high-value inward M&A deals. Nevertheless, it is notable that the provisional value of inward M&A activity recorded in Quarter 2 2017 is the lowest recorded since Quarter 2 2014, when the total value at that time was reported as £1.9 billion.

In Quarter 2 2017, there were 15 inward disposals with a recorded valued at £3.8 billion, similar to the number and value of inward disposals reported previously at Quarter 4 (Oct to Dec) 2016, when there were 13 successful transactions valued at £3.9 billion.

The recorded £2.9 billion completed inward mergers and acquisitions, along with £3.8 billion of inward disposals, suggests that there was a net inward disposal of UK companies by overseas companies in Quarter 2 2017. The net inward disposal is the first recorded since Quarter 4 2002; although it is important to note that the latest period data is provisional and therefore subject to revisions in the light of new information gathered over the coming quarters.

Notable inward transactions, which completed during Quarter 2 (Apr to Jun) 2017:

Engie of France acquired Regeneration Arm of KeepMoat Homes Ltd of the UK.

Expedia Inc of the USA acquired SilverRail Technologies UK Limited of the UK.

DCC Plc of the Republic of Ireland disposed of DCC Environmental Britain Limited of the UK.

Bank of America Corporation of the USA disposed of MBNA Limited of the UK.

Tata Steel Ltd of India disposed of Speciality Steel UK Ltd of the UK.

Liberty Hall Capital Partners of the USA acquired Dunlop Aircraft Tyres Ltd of the UK.

Liberty House Group PTE Ltd of Singapore acquired Speciality Steel UK Ltd of the UK.

CK Hutchison Holding of Hong Kong acquired Transvision Investments Ltd of the UK

PCCW Ltd of Hong Kong disposed of Transvision Investments Ltd of the UK

AAC Capital Nebo Sub LP of Guernsey disposed of Dunlop Aircraft Tyres Ltd of the UK.

Sumitomo Rubber Industries Ltd of Japan acquired Dunlop International 1902 limited of the UK.

Tabasco B.V. of the Netherlands disposed of Exova Group Plc of the UK.

The Blackstone Group L.P. of the USA acquired The Office Group Holdings Ltd of the UK.

MSIP International Holdings of the Netherlands disposed of Affinity Water of the UK

Mastercard Inc of the USA acquired Vocalink Holdings Ltd of the UK.

The value of domestic M&A increased when compared with the previous quarter

During Quarter 2 (Apr to Jun) 2017, the estimates for the number of successful domestic mergers and acquisitions (M&A) saw a decrease when compared with the previous quarter and were notably below the numbers and values recorded during all quarters of 2016 (Figure 4).

There were 66 completed domestic M&A during Quarter 2 2017 worth £4.0 billion, compared with 94 successful acquisitions worth £3.2 billion reported during Quarter 1 (Jan to Mar) 2017.

One high-profile acquisition which accounted for the majority of the total value of domestic acquisitions (£4.0 billion) during Quarter 2 2017, was Lloyds Bank Group Plc of the UK, who acquired the entire ordinary share ownership of MBNA Limited of the UK.

Year-on-year comparison of successful domestic M&A between Quarter 2 2016 (130 acquisitions worth £6.8 billion) and Quarter 2 2017 (66 acquisitions worth £4.0 billion) saw an overall decline in M&A activity, falling by 49% in terms of number and 41% in terms of value.

The total number of domestic M&A can be split into those made by independently- controlled companies and those which are subsidiaries. The acquisition of an independent company means the purchase of a company in its entirety, whereas the acquisition of a subsidiary means the acquisition of a part of a company, between 50.1% to 100% ordinary share ownership.

During Quarter 2 2017, there were 62 domestic acquisitions of UK independently-controlled companies worth £1.8 billion and four domestic acquisitions worth £2.2 billion, involving subsidiaries between UK company groups (Figure 5).

Other notable successful domestic acquisitions which completed during Quarter 2 (Apr to Jun) 2017

Busy Bees of the UK acquired Treetops Nurseries of the UK

Capvest of the UK acquired Karro Food Group Ltd of the UK

Midlothian Capital Partners Ltd of the UK acquired Park Leisure 2000 Ltd of the UK

Element Materials Technology Group Ltd acquired Exova Group Plc. Not confidential

The mergers and acquisitions (M&A) data and information in this release only include data for acquisitions, mergers and disposals that are successfully and legally completed. As part of the production process we also identify announced and agreed M&A transactions.

The following notable M&A transactions will feature in future releases once successfully completed:

• British American Tobacco Plc of the UK to acquire full ownership of Reynolds American Inc of the USA

• China Investment Corporation to acquire Logicor Europe Ltd of the UK

• Elis SA of France to acquire Berendsen Plc of the UK

• Macquarie Group Ltd of Australia to acquire The Green Investment Bank of the UK

• Standard Life Plc of the UK to acquire Aberdeen Asset Management Plc of the UK

Global mergers, 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 mergers and acquisitions (M&A) transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the 2008 to 2009 economic downturn, M&A activity declines. On the other hand, the process of completing an M&A transaction takes time and sometimes there is a lag between improving economic conditions and any quarter-on-quarter increase in M&A activity.

The Agents’ Summary of Business Conditions report for Quarter 2 (Feb to May) 2017, produced by the Bank of England, reported that “investment intentions had strengthened a little further, including investment in technology and to support increased export demand. However, heightened uncertainty remained a drag on some businesses’ willingness to invest”.

The same report stated that “credit conditions had remained accommodative overall. However, some smaller companies reported greater difficulty in gaining access to banks’ relationship managers in recent months. Credit demand had remained steadily but muted reflecting some firms’ low appetite for gearing”.

The Inflation Report for May 2017, produced by the Bank of England reported that “uncertainty surrounding the United Kingdom’s future trading arrangements is likely to weigh on firms investment intentions in coming years. For example, the fall in sterling reflects the likelihood that the costs of exporting for some businesses will go up, firms may choose to hold off investment decisions until they become more certain about the outlook”.

Data for Quarter 1 (Jan to Mar) 2017 have been revised in the light of new information. No further revisions to data prior to Quarter 1 2017 have been made. Therefore time series data for all quarters of 2016 and any previous historic quarterly periods remain unchanged.

Annual data tables for 2016 are produced in conjunction with the Quarter 1 2017 data outputs. Revisions to the 2016 quarterly and annual figures were recalculated at Quarter 1 2017 only. Therefore no revisions to annual data prior to 2016 have been made and subsequently time series data for previous historic annual periods remains unchanged.

Revisions to the aggregates used in mergers and acquisitions (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.

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 if early estimates are consistently under or over estimating 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.

The Mergers and acquisitions Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data
• users and uses of the data
• how the output was created
• the quality of the output including the accuracy of the data