US M&A value in UK up by 115 percent in 2018

The ambiguity surrounding the Brexit deal has had an impact on EU company Merger and Acquisitions (M&A) in the UK this year, according to Moore Stephens.

However, the firm’s report shows that the value of M&A deals made by US companies in 2018 is up by 115 percent, at £79bn. In 2017 the value of US M&A’s was reported at £36.8bn.

In the report, Moore Stephens claimed: “US takeovers of UK companies, unlike their European rivals, [proves that they] have shrugged off Brexit concerns and continue to see good value in UK business. This has been in part due to the devaluation of sterling since 2014, making British businesses comparatively cheaper than many of their foreign competitors.”

In the last twelve months, EU company involvement in the takeover of UK businesses has fallen from £14.1bn to £13.3bn, which is 5 percent of the market’s previous value.

The report stated: “This may be because Brexit has been perceived more negatively on the continent by politicians, business groups and the media than in the US, making European businesses more cautious about acquiring UK companies.”

This doubling of US investment comes as a surprise to many. Up until this point, the general consensus has been that the US would “reduce outward investment, following Trump tax reforms.”

Moore Stephens’ report continued: “New rules encourage firms to repatriate cash they hold overseas to the US as well as incentivising inward rather than outward investments. Previously, cash held outside the US had been used to fund overseas M&A.”

The confidence US investors must have in UK businesses to prompt the 115 percent increase in M&A’s is perhaps “indicative of the underlying strength” and “openness of [the British] economy,” Moore Stephens claimed.

Damian Ryan, partner at Moore Stephens, said: “Britain’s businesses continue to be some of the most attractive investment opportunities across the globe. It is a market too big to ignore.”

Coca Cola’s planned £3.9bn bid for Costa Coffee from Whitbread, Marsh & McLennan’s offer of £4.3bn for the UK insurance company, Jardine Lloyd Thompson, and Apple’s recent £229m purchase of Shazam all further supports this. Clearly, the US is eager to invest in UK businesses, even as Brexit uncertainty discourages EU companies from putting forward their own M&A bids.

Ryan added: “Whilst Brexit has created uncertainty, the underlying strength of UK businesses means that they continue to be great investment opportunities for overseas investors. US investors are the ones taking advantage of this right now.

“Britain is home to many of Europe’s most innovative and fast-growth businesses, which will still be highly attractive to large multinational corporations after Brexit.

“The decline in EU-led M&A deals is possibly understandable, given their proximity to blanket Brexit media coverage, and the potential complexity of future trade with Europe. However, there is a risk that they have missed out on excellent investment opportunities, particularly given the weakness in sterling.”

With a US presence making itself increasingly known in the UK business world, however, it could just be that EU companies regret their caution as they miss out on M&A opportunities.