UK M & A Lowest For Some Time

The overall value of mergers and acquisitions involving UK companies decreased in the first quarter of 2012 compared with the last quarter and remains low. Overseas acquisitions by UK companies fell to their lowest quarterly level since this series of statistics began in 1987. The value of acquisitions in the UK by foreign companies also reached the lowest level (£3.9bn) since Q2 2010 when it was £2.8bn. Domestic acquisitions fell from £1.8bn to £1.1bn, the lowest since 2009. The net value of cross border transactions was -£5.3bn. What it means is that foreign companies invested more in UK companies in inward investment, than UK companies invested abroad in outward investment. The most significant transaction abroad by a UK company was the disposal by Old Mutual Plc of Skandia Insurance Company Ltd (Sweden) for £2.1bn. The most significant inward transaction was the acquisition of Northern Rock Plc by Vigin Group Holdings Ltd. Other significant transaction included the acquisition of Kalahari Minerals Plc by China Guangdong Nuclear Power Holdings Corporation. The most significant transaction by a UK company in the UK was the acquisition of Encore Oil Plc by Premier Oil Plc for a reported value of £0.3bn.

High Point In UK Overseas Acquisition Expenditure

UK companies' expenditure on acquisitions abroad reached their highest point since the first quarter of 2009 in the second quarter of 2010 according to the latest statistical bulletin from the ONS. The figure of £1.4bn is still well below earlier levels. Acquisitions in the UK by foreign companies fell to the lowest level since the second quarter of 2009 from £14.8bn to £2.3bn. Acquisitions of UK companies by UK companies in the UK increased from £1.3bn in Q1 to £1.9bn in Q2 2010.

There were 22 overseas acquisitions with values of over £1m by UK companies. There were 7 disposals of overseas companies for a total of £2.3bn in Q2 2010. Acquisitions of UK companies with values over £1m by foreign companies totalled 30. There were 10 disposals of UK companies by foreign companies with a total value of £1.3bn. In the UK, there were 66 acquisitions of companies with values over £1m by UK companies. They included 47 acquisitions of independent companies and 19 transactions involving subsidiaries.

Lowest Spend On M&A Since 1987

British companies spent £0.2bn on 10 acquisitions abroad in the first quarter of 2010 according to the ONS, £1bn less than the last quarter of 2009. It is the lowest value since records began in 1987. Expenditure on UK companies by UK companies was £1bn, £1.4bn less than Q4 2009. There were a total of 52 acquisitions. Foreign companies spent £14.3bn on 41 acquisitions in the UK during the quarter.

The 10 overseas acquisitions by British companies are included as they have values over £1m. The ONS used to use a threshold of £0.1m until recently and therefore there will be a discontinuity in the statistics. The 4 disposals of companies abroad by UK companies totalled £2.3bn and included the disposal of Rio Tinto Plc of Alcan Packaging Businesses for -£1.2bn and Rio Tinto Plc of Alcan Packaging Food American Division for -£0.8bn. Xstrata Plc disposed of El Morro SCM for -£3bn. The largest transaction in the UK by foreign companies was the acquisition of Cadbury Plc by Kraft Foods Inc of the US. One significant transaction in the UK by a British company was the acquisition of Standard Life Bank Plc by Barclays Plc for £0.2bn.

UK Order Books Looking Better

The manufacturing sector looks to be improving but profits are threatened by rising costs according to the latest Industrial Trends survey from the CBI. The first three months to April show that orders are rising for British made goods overseas but as order books are still recovering from 30 year lows, total order books are still below normal.

The growth in orders is expected to continue over the next few months and production is expected to increase along with it. It is reflected in business confidence which continues to improve. Average unit costs are rising and though domestic prices were stable prices may increase in the next three months. Most firms say they working below capacity.

Firms have continued to de-stock but levels of finished goods have fallen in the quarter and are expected to stabilise in the next as is work in progress as the decline in raw materials slows down. Credit and finance are expected to continue to limit output over the next three months and even constrain exports. A majority of firms have plans to invest in training and retraining and in innovation.

Growth In Manufacturing Output

An increase in overseas demand for UK goods and continued stock reduction saw manufacturing production increse for the first time in two years according to the latest CBI Industrual Trends survey for the three months to January 2010. Weak demand and access to finance mean that the outlook is still uncertain.

The survey reports the strongest output since January 2007 and the first increase in export orders since January last year. De-stocking is slower however and demand is weaker than expected. Business confidence is continuing to get better and more more managers are optimistic than three months ago. Fewer businesses reported reductions in staff numbers.

Business are also reported to be planning to invest in training and retraining and innovation. Capital investment in buildings is expected to be reduced but plant and machinery investments will remain almost unchanged. Firms are working below capacity and domestic prices are expected to rise.