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Statistical bulletin: Mergers and Acquisitions Involving UK Companies, Q3 2012 This product is designated as National Statistics

Released: 04 December 2012 Download PDF

Key findings

  • The value of cross-border (inward and outward) mergers and acquisitions (M&A) activity involving UK companies increased in Q3 2012, despite a decrease in the number of transactions.
  • Acquisitions abroad by UK companies (outward acquisitions) increased from £6.8 billion in Q3 2011 to £7.8 billion in Q3 2012. However, the number of transactions decreased from 77 in Q3 2011 to nine in Q3 2012.
  • Acquisitions in the UK by foreign companies (inward acquisitions) increased from £5.1 billion in Q3 2011 to £8.6 billion in Q3 2012. The number of transactions fell in Q3 2012 to 31, compared with 68 in the same quarter of the previous year.
  • Cross-border M&A activity involving UK companies continued to be dominated by large companies, a trend seen for the last three years.
  • Mergers and acquisitions between UK companies (domestic M&A) fell in Q3 2012 to its lowest level since 1992 (current price basis).

Summary

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.

Only transactions which result in a change of ultimate control of the target company are included. Throughout this release, figures relating to mergers are included within acquisitions. This series is volatile because the quarterly figures are often dominated by a small number of very large transactions. The values of transactions involving UK companies are published on a current price basis.

Table A: Number and value of mergers and acqusitions involving UK companies

Values in £ billion
  Acquisitions abroad by UK companies¹   Acquisitions in the UK by foreign companies¹   Acquisitions in the UK by other UK companies¹
  (outward acquisitions)   (inward acquisitions)   (domestic acquisitions)
  Number Value   Number Value   Number Value
                 
2010 199 12.4   212 36.6   325 12.6
2011 286 50.2   237 33.0   373 8.1
                 
2010 Q1  30 1.0   54 14.4   67 1.4
2010 Q2  49 2.3   48 2.8   95 2.0
2010 Q3  54 5.3   59 12.4   80 2.9
2010 Q4  66 3.8   51 7.0   83 6.3
                 
2011 Q1  70 19.8   54 5.8   76 1.5
2011 Q2  75 11.0   68 9.7   94 3.3
2011 Q3  77 6.8   68 5.1   97 1.5
2011 Q4  64 12.6   47 12.4   106 1.8
                 
2012 Q1r 25 0.8   51 4.3   63 1.1
2012 Q2r 41 6.1   48 2.7   79 1.0
2012 Q3p 9 7.8   31 8.6   47 0.5
                 

Table notes:

  1. See background notes 4, 5 and 6
  2. r = revised

    p = provisional

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Despite a fall in the number of transactions, the value of outward and inward acquisitions rose during Q3 2012, much in line with the views of external commentators such as Experian, who reported that cross-border M&A was dominated by businesses at the top end of the market. The increase in value per transaction is also broadly in line with global activity, as reported in the Appleby Q3 2012 Report for Offshore M&A Activity.

Cross-border M&A activity involving UK companies was dominated by a small number of large transactions, generally by businesses with strong balance sheets, who have access to credit on good terms. This could indicate some resilience in the M&A market.

Domestic transactions (acquisitions in the UK by other UK companies) fell to the lowest level reported since Q3 1992, when a figure of £0.5 billion was reported. Current domestic activity may offer an insight into the business conditions seen by the majority of companies. According to the Bank of England’s Trends in Lending report, it seems they may still be adopting defensive strategies in the face of economic uncertainty.

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 your work. Please contact us via email: fdi@ons.gsi.gov.uk or telephone Ciara Williams-Fletcher on +44 (0)1633 456455.

Transactions abroad by UK companies

This section illustrates the value and number of acquisitions and disposals abroad by UK companies over the last five years (outward M&A).

Value of transactions (Table 1)

Figure 1: Value of acquisitions abroad by UK companies

Value of acquisitions abroad by UK companies between 2007 and 2012
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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Number of transactions (Table 1)

Figure 2: Number of acquisitions abroad by UK companies

Number of acquisitions abroad by UK companies between 2007 and 2012
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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The value of acquisitions abroad by UK companies increased from £6.1 billion in Q2 2012 to £7.8 billion in Q3 2012 (Figure 1). However, the majority of this increase is attributable to fewer deals with significantly high values. When compared with Q3 2011, the value of foreign companies acquired by UK companies in Q3 2012 has risen from £6.8 billion to £7.8 billion, an increase of 15%.

The number of outward acquisitions between the second and third quarters of 2012 has fallen by 78%. There were 41 acquisitions of foreign companies by UK companies in Q2 2012, compared with nine in Q3 2012 (Figure 2). The number of transactions in Q3 2012 has fallen by approximately 88% compared with Q3 2011, a decrease of 68 deals.

The most significant transactions occurring in Q3 2012 were the acquisition of De Beers SA and D B Investments SA of Luxembourg by Anglo American Plc and the acquisition of Human Genome Sciences, Inc of the USA by GlaxoSmithKline Plc.

Value and Number of Disposals Abroad by UK Companies

Both the value and number of disposals abroad by UK companies decreased in Q3 2012. There were five disposals with a value of £0.6 billion, compared with 14 disposals reported in Q2 2012 with a value of £1.4 billion, a decrease of 55%. Compared with the same quarter a year ago, the value of disposals has decreased by approximately 83%, the lowest since Q2 2009, when the UK emerged from recession. This could be an indication that some companies are delaying the sale of their foreign businesses until the return of more favourable exchange rates and an improvement in M&A market conditions.

There were two significant transactions in Q3 2012 namely the disposal of St Hubert SAS of France by Dairy Crest Group Plc for a reported value of £0.3 billion and the disposal of Energy North Natural Gas, Inc & Granite State Electric Company of the USA by National Grid Plc.

Transactions in the UK by foreign companies

This section illustrates the value and number of acquisitions and disposals in the UK by foreign companies over the last five years (inward M&A).

Value of transactions (Table 1)

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

Value of acquisitions in the UK by foreign companies between 2007 and 2012

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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Number of transactions (Table 1)

Number of acquisitions in the UK by foreign companies between 2007 and 2012

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.

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The value of acquisitions in the UK by foreign companies (inward investment) increased substantially between Q2 and Q3 of 2012 from £2.7 billion to £8.6 billion (Figure 3). However, there were fewer deals recorded and of these, a proportion were of significant value.

There were 31 acquisitions of UK companies by foreign companies in Q3 2012, down from 48 in Q2 2012.

When comparing inward acquisitions with the same period a year ago, the value has increased by 68% from £5.1 billion in Q3 2011 to £8.6 billion in Q3 2012. However, compared with the same quarter in the previous year, the number of transactions in Q3 2012 has actually fallen by 37 deals. This may indicate that, during this period, M&A activity was dominated by larger companies.

Three significant deals are shown in the table below and account for 47% of the total value of inward acquisitions:

Table B: Significant transactions in the UK by foreign companies, Q3 2012

Value in £ million
     
CGI Group, Inc acquiring Logica Plc 1,700 *
PTT Exploration and Production Plc acquiring Cove Energy Plc 1,221 *
H&F Lux Holdco S.A.R.L. acquiring Charterhouse Nadia 1 Limited 1,129 *
     

Table notes:

  1. * Value as reported in financial press or other public sources
  2. See background notes 2, 3 and 4

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Another significant deal which completed in Q3 was the acquisition of NDS Group Holdings Ltd by Cisco Systems, Inc of the USA.

Transactions in the UK by other UK companies

This section illustrates the value and number of acquisitions in the UK by other UK companies over the last five years (domestic M&A).

Value of transactions (Table 8)

Figure 5: Value of acquisitions in the UK by other UK companies

Value of acquisitions in the UK by other UK companies between 2007 and 2012
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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Number of transactions (Table 8)

Figure 6: Number of acquisitions in the UK by other UK companies

Number of acquisitions in the UK by other UK companies between 2007 and 2012
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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The value of acquisitions in the UK by other UK companies (domestic investment) fell between Q2 and Q3 of 2012, from £1.0 billion to £0.5 billion.  This is the lowest quarterly value reported since Q2 2009. The most significant transaction recorded in Q3 2012 was the acquisition of Woodstock Target 10 Limited by Trilliam Bidco Limited.

The number of domestic acquisitions decreased significantly between the second and third quarters of 2012 (Figure 6). There were 47 acquisitions of UK companies by other UK companies in Q3 2012, compared with 79 in Q2 2012. Within these transactions there were 40 acquisitions of independent companies (85% of the total number of deals) and seven transactions by company groups involving their subsidiaries (15%).

Annual comparisons of Q3 data between 2011 and 2012 reflect a sharp decline in domestic M&A activity, where both the number and value of domestic transactions fell considerably. There were 97 deals in Q3 2011 compared with 47 in Q3 2012, the lowest number reported since Q2 2009. This may be evidence of continued caution by UK companies to undertake equity capital transactions during the current economic climate.

 

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 fdi@ons.gsi.gov.uk or telephone Ciara Williams-Fletcher on (+44) (0)1633 456455.

  2. Basic quality information

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

  3. Relevance to users

    Within ONS, the mergers and acquisitions data are considered to be essential for producing Balance of Payments and economic accounts statistics. The survey results form 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 Mergers and Acquisitions 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 is used in preparing briefing and forecasting,

    • Department for Business, Innovation and Skills, where direct investment data is 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,

    • and HM Revenue and Customs, where the data is 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 is 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 Office for National Statistics (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 in one country acquires a controlling interest in a company incorporated in another country.

    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 Q1 and Q2 2012 have been revised in the light of new information, and so revisions to the data for Q1 and Q2 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 2011 are produced in conjunction with the Q4 2011 data. Revisions to the 2011 quarterly and annual figures are re-calculated at Q1 2012 only.  No revisions to annual data prior to 2011 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 C: Average revisions over the previous five quarters

      Value in latest quarter Average revision (Bias) Average revision without regard to sign (Average Absolute Revision)
    Value of Outward Acquisitions  6,123.0 944.2 944.2
    Value of Outward Disposals 1,375.0 204.4 278.8
    Value of Inward Acquisitions  2,713.0 778.2 778.2
    Value of Inward Disposals  .. .. ..
    Value of Domestic Acquisitions 1,021.0 396.2 415.4

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    Table D: Average revisions over the previous five quarters

      Number in latest quarter Average Revision (Bias)
    Number of Outward Acquisitions   41 19.8
    Number of Outward Disposals 14 6.4
    Number of Inward Acquisitions  48 15.0
    Number of Inward Disposals 7 -12.4
    Number of Domestic Acquisitions   79 23.4
         

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    The difference between the first and later estimate give an indication of the magnitude of one component of error in the first estimate.  A statistical test is applied to the average revisions to find out if there is bias in the estimates. The revisions are considered to be biased if the mean revision is significantly different from zero. Analyses indicate statistically significant bias in the revisions for the value of inward acquisitions, however, as a caveat, a relatively short period of time is being considered (implying that the degrees of freedom are low). For the other variables, these tests were not statistically significant for any of the key variables implying that the average revision might be non zero simply through random effects.

    This reflects the fact that the primary reason for revisions to the numbers of transactions is the identification of further deals after the statistics are initially released.

  8. Response rates

    Table E: Response rates

    Cross-border mergers and acquisitions: Outwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q2 2012 Q3 2012
    Response Rate (%) 85 100
         
    Cross-border mergers and acquisitions: Inwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q2 2012 Q3 2012
    Response Rate (%) 87 71
         
    Domestic mergers and acquisitions (DAM)
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Q2 2012 Q3 2012
    Response Rate (%) 93 87
         

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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. The size of this discontinuity is highlighted in figures 3, 5 and 7.

    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.

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    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. ONS is working hard to meet the requirements set out in this assessment report.

    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

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