Multi-billion pound takeover deals are bouncing back from the credit crunch with UK ¬companies proving the most attractive targets in Europe for Chinese and American firms.
The latest figures from data provider Dealogic show a 15 per cent rise in worldwide merger and acquisition deals to $730.9 billion (£456 billion) in the first three months of 2011 against a year earlier. These are driven by rising commodity prices, the need to secure future energy supplies and stronger worldwide ¬economic confidence.
Oil and gas was the leading targeted sector worldwide with deals worth $83.4billion, up 23 per cent from last time. It accounted for a record 11 per cent of all mergers and acquisitions (M&A) transactions.
The US was the biggest market with M&A volumes up 49 per cent to $303.1billion. The UK was the most targeted nation in Europe over the period with the volume of deals up to $37.5billion compared with $25.6billion last time.
The utility and energy sector was the biggest target sector in the UK, accounting for $6billion worth of deals followed by the professional services, real estate and healthcare industries.
Top deals over the period in the UK include the pending purchase of E.ON UK’s distribution network by PPL Corp of the US, the yet to be completed acquisition of uranium miner Kalahari Minerals by state-owned China Guangdong Nuclear Power Group and the seizing of control of EMI Group, home of hard working Australian singer Kylie Minogue, by US bank Citigroup.
Below the mega deals the UK market is alive with transactions as Lawyers report the best activity quarter since 2008. It is a mixed bag: Banks trying to extract cash, by encouraging divestments or mergers; Voluntary divestment of non-core divisions, by groups to generate cash and reduce cash dependence on the banks. The German’s are becoming more active now as capacity is getting mopped up back home and the price earnings ratio on deals are more realistic.
Commenting on the market Guy Bottard of Sirius Business Law said he expected to see “A number of significant retirement sales as business families, that have survived the recession, looked to spread their asset portfolio. Overseas purchasers are up sharply looking for asset based deals funded by cash horded in the down turn. Also the trend amongst purchasers was to bring specialist lawyers in alongside them on a fixed fee basis something that many traditional lawyers shy away from. Many of the deals are concluded quickly as in many cases Banks are not involved at all”
It was not all one way as UK firms spent a quarterly record $24.1billion in emerging markets.The volume was driven by BP’s pending $9billion acquisition of oil and gas blocks from Mumbai-based energy group Reliance Industries and its controversial planned $7.9billion tie-up with Russian oil giant Rosneft.
With a degree of buoyancy returning to Mergers and Acquisitions it will be good for the economy as a whole as new owners traditionally invest in infrastructure to support the decision to purchase in the first place and management, with the banks off their backs, can become more outward facing seeking profitable growth.
Author: Chris Slay
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