The UK remained the most attractive market for buyers after the US according to Allen & Overy’s latest M&A Index.
Foreign buyers made 36 acquisitions in the UK worth $35bn in the first half of this year (compared with 43 acquisitions worth $41bn in the same period last year), according to the law firm’s Index. In contrast, UK companies made 29 deals abroad worth $18.5bn in the first half of 2013 (compared with 40 acquisitions worth $20.5bn last year), led by Vodafone’s $7.7bn acquisition of Kabel Deutschland.
The US continues to rank as the most popular market for foreign buyers (56 deals worth $44bn in the first half of 2013) and continues to be the most aggressive outbound acquirer (83 deals worth $78bn in the first half of 2013). Foreign buyers have shown increasing interest in acquiring companies in China, with 24 deals worth $8.9bn in the first half of 2013 compared with 13 deals worth $5.3bn in the same period last year.
Amid a global slowdown in M&A activity, UK levels picked up in the second quarter, although they still remained down by 21 per cent for the first half of the year compared with the same period last year. Global M&A activity was down 29 per cent in the first half of 2013 with the total number of deals falling to 895 — the lowest half-year total since 2009 — as renewed economic and political uncertainty deterred deal making.
In the second quarter of 2013, worries about the future of the euro subsided; however, the much-hoped-for M&A recovery was put on hold as a new set of worries emerged. In the US, the Federal Reserve’s intention to wind down its programme of bond buying sparked fears of higher interest rates. Elsewhere, concerns about China’s slowdown persisted, while popular protests in the Middle East and Brazil and sharp currency devaluations across many emerging markets have led to significant market turbulence.
Despite the depressed activity, Dirk Meeus, co-head of Allen & Overy’s global corporate practice, believes the Index does give reasons to remain optimistic about the M&A markets.
He said: ‘We continue to believe that M&A markets are growing in strength and will continue to recover in the rest of the year. Interest rates remain at historical lows, corporates and private equity houses continue to have plenty of cash and access to financing continues to improve for the right deals.
‘Risks can be turned into opportunities — it is a case of fortune favouring the brave.’