Sovereign funds target UK plc

Grant Thornton
says that government intervention is making UK plcs a takeover target for
sovereign wealth funds, which could put more FDs in the firing line.

Corporate finance experts at the firm have seen an upswing in man-dates from
offshore outfits looking to make bargain acquisitions in the UK, especially from
fast developing nations such as India, with many of these firms seeing the
extent of economic difficulties affecting the UK economy as offering a golden
opportunity to snap up bargains.

‘These companies and in some cases sovereign wealth funds want to get a
foothold in the UK and are doing so forcefully,’ said David Brooks, corporate
finance partner. ‘If developing economies, particularly in Asia, hold up
significantly better than the UK, expect to see a steady buy-up of UK companies.

‘There is certainly the chance of more government influenced M&A
initiatives before the worst of the financial crisis is past,’ Brooks said.

In Q3, there were 192 purchases of UK companies by offshore interests for a
total of £32.7bn ­ but while deal numbers were down from 280 in the previous
quarter, values were up by £13.24bn.

M&A activity between UK companies has been at its lowest level since
1993, but the government’s propping up of blue chip businesses has kept the
value of deals high.

The government-driven takeover of HBOS by Lloyds TSB had a reported price tag
of £12.54bn. Government involvement also helped boost the value of foreign
purchases in the UK. The sale of the British Energy Group to French firm EDF was
worth £9.17bn, according to GT.

‘The almost completely hands-off government approach applied for more than
two decades on driving M&A deals has been replaced with significant market
intervention, albeit centred on the financial sector,’ Brooks added.

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