The number of mergers and acquisitions (M&A)1 involving UK companies has been on a broad downwards trend since ONS began collecting data on M&A activities in 1987 (see Figure 1). This can be broken down into three periods in which the number of M&A transactions was relatively stable, with two downward step-changes occurring before and during the 1991 and 2008-9 economic downturns.
During the first period (1987 to 1989) the average number of deals was 2,288 per year; by the second period (1992 to 2006) the number had fallen to 1,418 per year; and finally during the third (2010 to 2013) there were only 842 deals on average each year.
Figure 1: Number of M&A deals involving UK companies, 1987 to 2013
Number of acquisitions by UK companies abroad has been on the decline
The total number of M&A transactions can be divided into: UK by other UK companies, by UK companies abroad, and by foreign companies in the UK. Interactions between UK and foreign companies can also be divided into acquisitions and disposals2.
Domestic M&A transactions account for the largest proportion of transactions involving UK companies and both broadly follow the same downward step-change trend. In comparison, the number of acquisitions by UK companies abroad has been on a gradual yet relatively sustained downward trend since a peak of 681 in 1989 – reaching a record low of 58 during 2013. These downwards trends are in contrast with the number of acquisitions of UK businesses by foreign companies, which has been broadly stable over the period with an average of 184 deals per annum.
While the number of M&A transactions involving UK companies has fallen since 1989, the total value of these deals has remained broadly stable (given the effect of inflation) over the same period; between £8bn and £40bn, as seen in Figure 2. However, both inflation and currency movements will affect the nominal value of the deals, and the irregular occurrence of very large M&A transactions (such as in Q2 2000) can create large, infrequent outliers – therefore erratic movements should be interpreted with caution.
Figure 2: Contributions to the total value of M&A deals involving UK companies, Q1 1987 to Q1 2014
- Contributions may not add to total, as data for certain periods have been suppressed to avoid disclosure.
Increased prominence of foreign acquisitions
The composition in value terms of M&A activity involving UK companies has changed over time, with a gradual shift towards more foreign acquisitions of UK companies from the mid 1990s onwards. The quarterly average value of foreign acquisitions of UK firms was £1.8 billion between Q1 1987 and Q4 1995, which rose to £9.3 billion between Q1 1996 and Q1 2014. This coincided with a reduction in the value of domestic M&A following the 2008-09 economic downturn, which fell from an average value of £6.6 billion between Q1 1987 and Q4 2008 to £2.1 billion since then.
This change in the composition of M&A involving UK companies highlights that M&A activity has remained a prominent part of the UK economy, but the nature of M&A activity has evolved over time. This can be seen when comparing the number of M&A deals involving UK companies to the total value of these deals. Figure 3 does this, while deflating the value of deals by the GDP deflator3 to attempt to estimate a ‘real’ measure of value that is comparable over time. The downward trend in numbers, and the stable trend in ‘real’ value, indicates that the average ‘real’ value of each deal will have risen over the long term.
Figure 3: Value (deflated by the GDP deflator) and number of M&A deals involving UK companies, 1987 to Q1 2014
'Mergers and Acquisitions’ includes only those deals that involve a change in majority share ownership.
A ‘disposal’ occurs when a deal means one company relinquishes majority control over another company.
The GDP deflator, as a measure of aggregate inflation in the UK economy, is an imperfect measure of price inflation for M&A deals involving UK companies. As such, comparisons made using it are illustrative and conditional on the assumption that price inflation of M&A deals involving UK companies is broadly similar to inflation in the UK economy in general.