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UK mergers halve in Brexit vote aftermath, but value of deals rise


The number of mergers involving UK businesses nearly halved in the three months following the UK's vote to leave the EU compared to the preceding three months, according to new official figures.

The Office for National Statistics (ONS) said that there were 140 successful domestic and cross-border mergers, acquisitions and disposals involving UK businesses between the beginning of July and end of September this year (Q3). In the months of April, May and June (Q2) there were a total of 278 completed deals.

However, according to the figures, the total value of the deals completed increased slightly over the respective three month periods. The 140 deals completed in Q3 had a total value of £34 billion, compared to £33.1bn for the 278 transactions in Q2.

There was a fall in the number of mergers completed in Q3 that involved both UK buyers and target companies compared to Q2, according to the figures. The 72 domestic acquisitions completed in Q3 had a total value of £3.2bn. However, in Q2 there were 152 such deals done, worth £7.2bn. In Q3 last year, though, there were just 60 successful domestic acquisitions. Those deals valued £1.2bn in total.

The ONS data showed that the number of UK companies acquired by businesses based elsewhere in the world fell in Q3 compared to Q2, but that the total value of the deals that were completed in the latter period was greater.

In Q3, 41 UK businesses were bought by foreign companies for a total of £28.4bn. There were 71 such deals in Q2 which valued at £22bn in total. In the third quarter of 2015, 37 UK companies were acquired by foreign businesses in deals worth a total of £8.3bn.

The number of UK businesses buying foreign companies during Q3 also fell compared to both the same period last year and Q2 this year, according to the ONS figures. The recorded total value of those deals was higher, though, than during those previous three month periods.

During Q3 this year, 27 UK businesses "successfully completed outward M&A transactions". Those deals were worth £2.4bn in total. In Q3 last year there were 39 outward M&A deals done involving UK buyers valued at £2.1bn, and in Q2 this year there was 34 such deals done worth £1.7bn.

According to a survey of chief financial officers published by Deloitte in October, "Brexit concerns are weighing on corporate risk appetites". However, just 15% of CFOs said they expect to decrease their expenditure on M&As in the next three years as a consequence of Brexit, the survey report said:

Mergers and acquisitions expert Jonathan Beastall of Pinsent Masons, the law firm behind Out-Law.com, said: "Whilst it is easy to blame Brexit fears for the reduction in M&A activity it should be remembered that the appraisal of risk is a many-faceted thing and businesses are currently experiencing significant political and economic uncertainty across the globe." 

"We expect M&A activity to continue at healthy levels as opportunities flowing from this uncertainty arise. However, in order to take advantage of those opportunities companies will need to be agile and well prepared to pounce both financially and strategically. That will translate into, amongst other things, clear communication with stakeholders to ensure support is forthcoming as well as significant diligence on likely commercial outcomes for a target’s trading based on a balanced view of the possible outcomes of events such as Brexit," he said.

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