Sunday 25 August 2019

Mergers & acquisitions activity from UK fell 70pc last year

Weakening: Sterling's poor performance against both dollar and euro has affected outbound M&A activity. Photo: Getty Images/iStockphoto
Weakening: Sterling's poor performance against both dollar and euro has affected outbound M&A activity. Photo: Getty Images/iStockphoto
John Mulligan

John Mulligan

The value of outbound mergers and acquisitions (M&A) from companies based in the UK plunged 70pc last year to £22.7bn (€25.1bn), according to a new report on global M&A by Irish law firm Mason Hayes & Curran.

But it noted that domestic M&A activity in the UK jumped 41pc to £26.5bn in 2018, while the amount of inbound M&A deals to the UK doubled to £71.1bn (€78.6bn).

The shifts in UK-related M&A activity almost certainly reflect uncertainty surrounding Brexit, and the consequent weakening of sterling versus both the dollar and the euro.

The Mason Hayes & Curran has also examined deals in which it was involved between January 2018 and March 2019, and said that 28pc of them involved an earn-out clause for the seller.

Of those deals with earn-out conditions, 28pc were in place for a period of one-and-a-half years, while 28pc were over a two-year period. An additional 16pc were for between three and five years, while 28pc were for an uncertain period and contingent on a specific event occurring. In the previously analysed period, 40pc of earn-outs were for a period of less than one year.

Mason Hayes & Curran said that the latest study of its deals indicated an "increasingly seller-friendly market", as the availability of finance and shortage of business for sale "continues to lead to strong competition in auction and sales processes".

The law firm said that a strong majority of the deals it worked on in the 15-month period included specific indemnities related to known concerns about a takeover target, such as an ongoing claim.

It said it's now customary to see warranty and indemnity insurance in M&A transactions, and for certain types of private M&A transactions such as auctions and private equity buyouts.

The Mason Hayes & Curran's deals included in the survey spanned sectors from technology to property.

Indo Business

Also in Business