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Statistical bulletin: Mergers and Acquisitions Involving UK Companies, Q1 2013 This product is designated as National Statistics

Released: 04 June 2013 Download PDF

Key points

  • The number of acquisitions and disposals involving UK companies continued on a downward trend in Q1 2013, falling from 154 transactions in Q1 2012 to 60 in Q1 2013, a decrease of 94 deals.
  • Domestic mergers and acquisitions between UK companies were valued at £1.0 billion in Q1 2013, an increase of approximately £0.3 billion on the previous quarter. However, the number of transactions decreased from 61 in Q4 2012 to 24 in Q1 2013.
  • Inward acquisitions by foreign companies increased slightly from £2.0 billion in Q4 2012 to £3.2 billion in Q1 2013. The number of transactions fell from 23 in Q4 2012 to 12 in Q1 2013.
  • The value of acquisitions abroad by UK companies (outward acquisitions) fell from £2.7 billion in Q4 2012 to £0.7 billion in Q1 2013. The number of transactions also decreased from 35 in Q4 2012 to 14 in Q1 2013.

Introduction

This statistical bulletin provides estimates of the value and numbers of mergers, acquisitions and disposals involving UK companies with values of £1.0 million or more. The information provided reflects solely the change in majority ownership (ordinary shares). See note 5 of background notes.

These estimates are used to enhance the Foreign Direct Investment survey and to update company profiles on the Inter Departmental Business Register (IDBR).

Only transactions which result in a change of ultimate control of the target company are included. In the text that follows, figures relating to mergers are included within acquisitions. The values of transactions involving UK companies within this publication are on a current price basis. See background note 3. 

User engagement

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. Please contact us via email:  m&a@ons.gsi.gov.uk  or telephone Ciara Williams on +44 (0)1633 456455.

Summary

Total UK and cross border M&A volumes have declined

During Q1 2013 the total number of domestic and cross border M&A deals involving UK companies fell by 61% when compared with Q1 of 2012. Furthermore, Q1 2013 witnessed the lowest number of transactions seen since the financial crisis of 2008 and far fewer large deals completed during this period.

External commentators such as Thomson Reuters and Experian, are also reporting that Q1 2013 was the slowest quarter for mergers and acquisitions activity for some time.

Uncertainty continues in UK market by companies at home and abroad

Q1 2013 saw a significant number of domestic companies entering administration, such as Blockbuster, Jessops, Republic, HMV and Ethel Austin.

Although there may be some signs of improving economic conditions in early 2013, the overall situation remains challenging.  UK GDP grew by 0.3% quarter-on-quarter in the first quarter. However, growth in household consumption remains weak. 

The value of inward investment increased slightly in Q1 2013 from the previous quarter even though the number of transactions almost halved. The average value of these transactions increased compared with the final quarter of 2012. This decline in deal activity could be an indicator that the economic conditions may be deterring potential investors.

UK companies continue to remain cautious investing abroad

During Q1 2013, UK outward M&A activity went even further into decline, reaching its lowest levels since the series began in 1987. The International Money Fund (IMF) observed improving global financial conditions over the six months to April 2013 in their latest Financial Stability Report. While there have been improvements in financial market confidence and the economic outlook is becoming more favourable, the IMF concludes that continued improvements are required to prevent the re-emergence of financial risks.

Euro Area GDP  is estimated to have fallen by 0.2% quarter-on-quarter in Q1 2013, continuing the flat trend of economic growth. External analysts suggest that US economic growth may be weakening. Therefore, UK companies may be cautious when assessing M&A opportunities overseas given broadly flat domestic demand in the UK and the economic conditions in traditional UK M&A markets.

 

Table A: Number and value of mergers and acquisitions involving UK companies, by year and by quarter

Values in £ billion
  Acquisitions in the UK by other UK companies¹ (domestic acquisitions)   Acquisitions in the UK by foreign companies¹ (inward acquisitions)   Acquisitions abroad by UK companies¹ (outward acquisitions)
  Number Value   Number Value   Number Value
2002 430 25.2   117 16.8   262 26.6
2003 558 18.7   129 9.3   243 20.7
2004 741 31.4   178 30.0   305 18.7
2005 769 25.1   242 50.3   365 32.7
2006 779 28.5   259 77.7   405 37.4
2007 869 26.8   269 82.1   441 57.8
2008 558 36.5   252 52.6   298 29.7
2009 286 12.2   112 32.0   118 10.1
2010 325 12.6   212 36.6   199 12.4
2011 373 8.1   237 33.0   286 50.2
2012 266 3.4   161 17.4   122 17.9
                 
2011 Q1 76 1.5   54 5.8   70 19.8
2011 Q2 94 3.3   68 9.7   75 11.0
2011 Q3 97 1.5   68 5.1   77 6.8
2011 Q4 106 1.8   47 12.4   64 12.6
                 
2012 Q1 62 1.1   51 4.2   25 0.8
2012 Q2 81 1.0   48 2.5   41 6.2
2012 Q3 62 0.6   39 8.8   21 8.2
2012 Q4 61 0.7   23 1.9   35 2.7
                 
2013 Q1 24 1.0   12 3.2   14 0.7

Table source: Office for National Statistics

Table notes:

  1. 2012 Q1 to Q4 have been revised,  2013 Q1 is provisional. See background notes 4, 5 and 6.

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Further analysis: Transactions in the UK by other UK companies

This section illustrates the value and number of acquisitions in the UK by other UK companies.

                                       

The value of acquisitions in the UK by other UK companies (domestic acquisitions) rose slightly between the final quarter of 2012 and the first quarter of 2013, from £0.7 billion to £1.0 billion. The pattern over these two quarters is similar to that recorded over Q1 and Q2 2012.  

The number of domestic acquisitions decreased between Q4 2012 and Q1 2013. There were 61 acquisitions of UK companies by other UK companies in Q4 2012 compared with 24 in Q1 2013, a decrease of 61%.This is the lowest number of domestic acquisitions since ONS began collecting quarterly data in 1969.  Of these acquisitions, there were 17 acquisitions of independent companies (71% of the total number of deals) and seven transactions by company groups involving their subsidiaries (29%).

The most significant domestic acquisitions in Q1 2013 were the acquisition by London & Stamford Property Plc of Metric Property Investments Plc for £0.2 billion and the acquisition by Advanced Computer Software Group Ltd of CSG Equity Co Ltd for a value of £0.1 billion.

Figure 1: Value of acquisitions of UK companies by other UK companies

Figure 1: Value of acquisitions of UK companies by other UK companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold was raised from £0.1 million to £1.0 million. There is therefore a negligible discontinuity in the value of transactions reported in the table above.
  2. All values are at current prices (see Background Notes for definition).

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Figure 2: Number of acquisitions in the UK by other UK companies

Figure 2: Number of acquisitions in the UK by other UK companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million. There is therefore a discontinuity in the number of transactions reported as illustrated above.

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Further analysis: Transactions in the UK by foreign companies

This section illustrates the value and number of acquisitions and disposals in the UK by foreign companies.

                                      

The value of acquisitions in the UK by foreign companies (inward investment) increased between Q4 2012 and Q1 2013, from £2.0 billion to £3.2 billion, an increase of 68%. One significant transaction was the acquisition of Aegis Group Plc of the UK by Dentsu Inc of Japan.

There were 12 acquisitions of majority ownership of UK companies by foreign companies in Q1 2013, down from 23 in the previous quarter. However, compared with the same quarter of the previous year, the number of acquisitions of UK companies in Q1 2013 has fallen by 39 deals.

Both the number and value of inward disposals decreased in the first quarter of 2013 to the lowest levels on record. There were three disposals with a total value of £80 million in Q1 2013 compared with eight disposals worth £1.2 billion in the previous quarter, a decrease in the value of transactions of 93%.

Figure 3: Value of acquisitions in the UK by foreign companies

Figure 3: Value of acquisitions in the UK by foreign companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold was raised from £0.1 million to £1.0 million. There is therefore a negligible discontinuity in the value of transactions reported in the table above.
  2. All values are at current prices (see Background Notes for definition).

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Figure 4: Number of acquisitions in the UK by foreign companies

Figure 4: Number of acquisitions in the UK by foreign companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million. There is therefore a discontinuity in the number of transactions reported as illustrated above.

Download chart

Further analysis: Transactions abroad by UK companies

This section illustrates the value and number of acquisitions and disposals abroad by UK companies.

                                       

The value of outward acquisitions abroad undertaken by UK companies fell considerably, from £2.7 billion in Q4 2012 to £0.7 billion in Q1 2013, a fall of 74%, yet similar to the value reported in Q1 2012. One significant transaction completed in the first quarter of 2013 was the acquisition by William Hill Plc of the UK of the Australian and Spanish businesses of Sportingbet Plc.

The number of acquisitions of foreign companies acquired by UK companies in Q1 2013 fell by 60% from the previous quarter and is the lowest number of transactions reported since Q1 2009 (17 deals). Comparison year-on-year shows that the number of outward acquisitions at Q1 has actually fallen by 44%, a decrease of some 11 deals.

The number of disposals abroad by UK companies decreased slightly in Q1 to seven transactions, from 11 transactions reported in the previous quarter, a fall of some 27%. This is the same number of outward disposals reported for both Q2 and Q3 in 2009.

Figure 5: Value of acquisitions abroad by UK companies

Figure 5: Value of acquisitions abroad by UK companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold was raised from £0.1 million to £1.0 million. There is therefore a negligible discontinuity in the value of transactions reported in the table above.
  2. All values are at current prices (see Background Notes for definition).

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Figure 6: Number of acquisitions abroad by UK companies

Figure 6: Number of acquisitions abroad by UK companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million. There is therefore a discontinuity in the number of transactions reported as illustrated above.

Download chart


Background notes

  1. User Engagement

    We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. Please contact us via email:  m&a@ons.gsi.gov.uk   or telephone Ciara Williams on +44 (0)1633 456455.

  2. Basic Quality Information

    The Quality and Methodology Information for Mergers and Acquisitions (300 Kb Pdf) (M&A) surveys report describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

  3. Relevance to Users

    The degree to which the statistical outputs meet users’ needs.

    Within ONS, the mergers and acquisitions data are considered to be essential for producing Balance of Payments and economic accounts statistics. The survey results forms important components of the UK Balance of Payments and the National Economic and Financial Accounts and are vital in the measurement of the financial and non-financial business sector accounts.

    The Cross-Borders Acquisitions and Mergers survey (M&A) data are used in the compilation of the estimates of Foreign Direct Investment (FDI). These data meet the needs of FDI by collecting data on all acquisitions which lead to a holding in excess of 10% of the issued share capital. These estimates then feed into the UK Balance of Payments and the 'Rest of the World' sector of the financial accounts in the National Accounts, for which there is an EU legal requirement. Individual transaction information is also used to estimate the counterpart in 'portfolio' investment flows for monthly Balance of Payments.
     
    The data collected are also used in updating business structures and country of ownership codes on the Inter-Departmental Business Register (IDBR).The IDBR is a comprehensive list of UK businesses that is used by government for statistical purposes.

    Elsewhere in government, examples of departments who use the data include:

    • HM Treasury, Economic Analysis Division, where the data are used in preparing briefing and forecasting;

    • Department for Business, Innovation and Skills, where direct investment data are required for ministerial briefing, parliamentary questions and in formulating trade policy;

    • UK Trade & Investment, where the information is used for briefing on the extent to which the UK is successful in attracting inward investment;

    • HM Revenue and Customs, where the data are used to help in forecasting company taxation.

    Non-government users include:

    • Private companies which are interested in analysing country and industry data for trends by foreign firms in the UK and by UK companies abroad and also for researching corporate finance activity and for the purpose of investment banking;

    • UK embassies of foreign countries, which are interested in information on specific countries and companies making acquisitions, and

    • Private sector economists, journalists and academics who are interested in information on particular industries and particular countries for research purposes and who use the data for periodic statistical comparisons.

    Feedback from users has indicated that the information received from the M&A survey has a high degree of relevance across the above user groups, meets the vast majority of user needs, and all information currently collected and published is used.

    Source of data:

    The information collected is based on reports in the financial press, specialist magazines, company and financial websites supplemented by special surveys to businesses to determine the form, value and timing of each transaction.

    Global M&A activity is often driven by the availability of credit and company profits as well as a sense of confidence in the economic outlook. The majority of large M&A deals involve some element of borrowing or leveraging and therefore when credit markets freeze, as happened in the 2007 global financial crisis, and the subsequent Euro-area sovereign debt crisis, then M&A activity could be curtailed. A poor global credit market would discourage M&A activity.

    If the information is not yet in the public domain, such transactions may not be reflected in the analysis. Where full information has not yet been received on the details of the acquisition or disposal, the value of the transaction indicated in the public domain is used as an interim estimate.

    The data shown in this release relate solely to mergers and acquisitions undertaken by companies: acquisitions by individuals are not included.

    All values are published as current prices which are the prices as they were at the time of measurement and not adjusted for inflation.

  4. Significant Transactions

    Significant Transactions tables show the reported figures for a selection of significant transactions which occurred in the quarter, where ‘significance’ is defined as the absolute value of the deal. The figures shown are usually the ones available from the financial press or other sources in the public domain although occasionally, with the consent of the company, the value returned to the ONS is used in the tables instead of the press reported figure. If the company’s consent cannot be obtained then the deal is excluded, however, the values are included in the aggregate tables. Occasionally, therefore, a large deal may be missing (suppressed) from the lists so it is best to regard these tables as an indication of the ranking of deals rather than a completely exhaustive listing. Press reported figures often differ to some extent from those supplied by companies to ONS and it is the latter which are used in compiling statistical aggregates in tables 1-10. Included in the prices quoted in the tables of significant transactions is the total published price paid for the company excluding any assumed debt where known. Deferred payments are included in the reported price even if the payment is made in a different quarter.

  5. Types of Transactions Covered

    Mergers are acquisitions in which all or part of the payment is made in shares, such that the shareholders of the two companies become shareholders of a new, combined company group.

    Demergers are disposals where a company group divides into two or more separate companies, in such a way that the shareholders of the restructured companies remain the same, or retain the equivalent value shareholding in one of the newly independent companies. Demergers are included in the statistics within disposals.

    Cross-border acquisitions denote transactions where a company in one country acquires, either directly or indirectly, a controlling interest in a company in another country.

    Direct transactions are those where a company acquires a controlling interest in another company.

    Indirect transactions are those where a company uses an existing foreign subsidiary to acquire a controlling interest in a company incorporated in another country. The acquiring foreign intermediate company may be located in the same country in which the acquisition is being made or in a different country.

    Acquisitions within the UK by other UK companies denote mergers and acquisitions involving only UK registered companies.

    Where the acquired company was a subsidiary of another company the transaction is classified as a sale between company groups.

    The phrase ‘acquisitions in the UK by UK companies’ refer to deals where the ultimate ownership remains in the UK. This heading does not cover the total number or value of deals where a UK company is the acquirer. When a foreign company acquires a UK company through one of its existing UK subsidiaries or a UK registered special purpose vehicle that deal is shown as part of the data under ‘acquisitions in the UK by foreign companies’.

  6. Financing

    This statistical bulletin provides details of the application of funds to effect mergers and acquisitions and the proceeds raised from disinvestments and demergers.

    For indirect foreign transactions there is the added complication of considering the movements of funds either as capital injection or in the form of loans between parent companies and their foreign subsidiaries making the acquisition. Occasionally, the foreign subsidiary obtains the funds required partly or entirely outside the UK from sources such as:

    a. Own resources
    b. Borrowing from banks and other local sources
    c. Share, bond and other capital or notes issued abroad

    A transaction may be funded by more than one method. 

  7. Revisions

    Data for all four quarters of 2012 have been revised in the light of new information, and so revisions to the data for Q1, Q2, Q3 and Q4 2012 have been published in this statistical bulletin. No further revisions to data prior to Q1 2012 have been made. Therefore time series data for all quarters of 2011 and any previous historic quarterly periods remains unchanged.

    Annual data tables for 2012 are produced in conjunction with the Q4 2012 data. Revisions to the 2012 quarterly and annual figures are re-calculated at Q1 2013 only.  No revisions to annual data prior to 2012 have been made.  Therefore time series data for previous historic annual periods remain unchanged.

    Revisions to the aggregates used in M&A principally occur for the following reasons:

    Completion of transactions:
    On announcement of a proposed transaction an expected completion date is usually given. The publicly reported values will be allocated to the quarter of expected completion. If the transaction is ultimately completed in an earlier or later quarter, the recorded values will be reallocated to the new quarter.

    Publicly reported values:
    Publicly reported values are initially used to compile the aggregates. These can vary considerably from the values ultimately supplied by the respondents, frequently because the assumption of debt has been included in the publicly reported value. A nominal value is applied if no publicly reported value is available. The final values used to create the aggregates are those supplied by the respondent.

    Non-completion of transactions:
    On announcement of a proposed transaction the publicly reported value of the transaction is recorded. If the transaction does not subsequently take place the recorded value will be deleted.

    Non-share transactions:
    On announcement of a proposed transaction it may appear that there will be transactions in the share capital of the companies involved and the publicly reported values will be recorded. If subsequent information contradicts this the recorded values will be amended or deleted.

    Control:
    On announcement of a proposed transaction it may appear that the transaction will give the purchasing company control of the purchased company, that is, a share ownership of greater than 50%. If subsequent information contradicts this the recorded values will be amended or deleted.

    Revisions from respondents:
    Very occasionally respondents revise the values that they have previously supplied to ONS. The revised values are those used to create the aggregates.

    Table B: Average revisions over the previous five quarters

    Values quoted in £ million
     Value of Value in latest quarter Average revision Average revision % Average revision without regard to sign1
             
    Outward Acquisitions 2,687.0 975.4 36.3 1,061.5
    Outward Disposals .. .. .. ..
    Inward Acquisitions 1,887.0 279.6 14.8 199.5
    Inward Disposals 1,150.0 464.4 40.4 570.8
    Domestic Acquisitions 692.0 133.4 19.3 92.0

    Table source: Office for National Statistics

    Table notes:

    1. Average Absolute Revision

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    Table C: Average revisions over the previous five quarters

     Number of Number in latest quarter Average Revision
    Outward Acquisitions  35 11.0
    Outward Disposals 11 4.4
    Inward Acquisitions 23 8.4
    Inward Disposals 8 1.8
    Domestic Acquisitions  61 14.4

    Table source: Office for National Statistics

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    Analysing average revisions between provisional and final estimates can provide an indication of reliability in an initial statistic. Provisional statistics may be based on less information than is available for final statistics as they have been processed consistently in one direction i.e. if early estimates are consistently under or overestimating the later figures. A test is subsequently performed on these average revisions to determine if they are statistically different from zero. Revisions that are not statistically significant imply that an average revision might be non-zero simply through random effects.

  8. Response Rates

    Table D: Response rates

    Cross-border mergers and acquisitions: Outwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q4 2012 Q1 2013
    Response Rate (%) 90 78
         
         
    Cross-border mergers and acquisitions: Inwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q4 2012 Q1 2013
    Response Rate (%) 87 73
         
         
    Domestic mergers and acquisitions (DAM)
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q4 2012 Q1 2013
    Response Rate (%) 92 91

    Table source: Office for National Statistics

    Table notes:

    1. Previous quarter has been revised, latest quarter is provisional.

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  9. Notes to Tables

    The deal identification threshold has been increased at Q1 2010 to a value of £1.0 million from a previous value of £0.1 million. As a consequence there is a discontinuity in the number of deals reported from Q1 2010 onwards compared with previous periods.

    Symbols used in the tables are:

    .. Figure suppressed to avoid disclosure of information relating to individual enterprises.
    – Nil or less than half the final digit shown.

    The sum of constituent items in tables may not always agree exactly with the totals shown due to rounding.

  10. Office for National Statistics

    The Office for National Statistics (ONS) is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK Government's single largest statistical producer. It compiles information about the UK's society and economy, and provides the evidence-base for policy and decision-making, the allocation of resources, and public accountability. The Director General of ONS reports directly to the National Statistician who is the Authority's Chief Executive and the Head of the Government Statistical Service.

    The UK Statistics Authority has reviewed this publication in their report: “Assessment of compliance with the Code of Practice for Official Statistics”: Statistics of International Transactions, which was published on 8 December 2011. This review recommended that the Mergers and Acquisitions estimates be designated as National Statistics, subject to ONS carrying out certain requirements.

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