 UK M and A market bounces back in 2011 with larger deals returning
17 May 2011: The UK M & A market shows signs of rebounding, with deal value in the first three months of 2011 increasing by 63% compared with the equivalent period last year.
The eighth edition of Deal Drivers UK – a comprehensive view of the UK M & A landscape published today by PKF in association with mergermarket – reveals that deals worth £23.2bn were completed in Q1 2011. By contrast, £14.2bn of deals was completed in Q1 2010.
The report concludes that the momentum generated by the strong start to the year, a return to larger deals and increased private equity activity point to this upward trend continuing through the remainder of 2011, despite the challenging funding environment facing many businesses.
The UK Deal Drivers report also found that:
- Larger deals appear to be returning to the market: average deal size in Q1 2011 was around £105m, compared with £66m in the same period last year;
- The number of deals has now exceeded 200 every quarter since Q1 2010; this is in sharp contrast to 2009, when quarterly deal volume peaked at 169;
- Energy and Financial Services were the most active sectors, representing 34% and 16% of aggregate deal value respectively;
- Within the Energy sector, renewable and cleantech are expected to be particularly active segments for Mergers and Acquisitions in the wake of heightened concerns over nuclear energy following the Fukushima disaster;
- Private equity buyouts and exits have increased in value by almost 38% to £6.2bn in Q1 2011 from £4.5bn in Q1 2010;
- The funding environment continues to be a top concern for UK businesses, particularly in the mid-market.
Hugh Mathew-Jones, a Corporate Finance specialist at PKF, said: “Several months into 2011, it appears that the UK M & A market is finally emerging from its protracted flat period. Activity in the energy sector has been particularly strong and there is growing interest in cleantech and renewable sources, particularly wind power. We expect this trend to continue in the wake of the Fukushima disaster and ongoing oil price instability.
“The year so far has also seen a notable spike in private equity activity and we forecast that buyout groups will remain active for the foreseeable future, particularly in the mid-market space. As mid-market businesses continue to grapple with reluctant lenders, opportunities are bound to present themselves to buyers that are willing and able to take advantage.”
Malcolm Locke, Head of UK coverage at mergermarket, said: “There is no doubt that M & A activity has picked-up in the first quarter of 2011. Those companies that have recapitalised their balance sheets, or turned to shareholders for fresh funding, are now in a strong position to lead the next wave of consolidation. Companies are realising that organic growth is not enough. Many are now turning to acquisitions as way to promote growth rates and expand their operations. This has led to a number of contested bids this year. Private equity firms have also re-discovered their appetite for deals, but are still sitting on vast amounts of cash that will need to be re-invested.”
In addition to the above findings, Deal Drivers UK examines cross-border M & A, financing strategies and private equity activity. The report also looks at the local challenges facing businesses in specific UK regions including the Midlands, the North and East Anglia.
ENDS
For further information, please contact: Andy Konieczko, PR Manager, on 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a whollyowned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited network of legally independent firms. The PKF International Limited network has around 17,600 people operating in 120 countries around the world.
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