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| Version 3 | Version 4 |
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| Brexit uncertainty cools foreign interest in UK buyouts | Brexit uncertainty cools foreign interest in UK buyouts |
| (5 days later) | |
| Value of foreign purchases of British-owned businesses in first nine months of year was lowest since 2010, study shows | Value of foreign purchases of British-owned businesses in first nine months of year was lowest since 2010, study shows |
| Phillip Inman | Phillip Inman |
| Sun 8 Oct 2017 18.59 BST | Sun 8 Oct 2017 18.59 BST |
| Last modified on Wed 14 Feb 2018 15.31 GMT | |
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| Foreign firms have put the brakes on buying British rivals this year in response to Brexit uncertainty, despite the lure of snapping up businesses that have tumbled in value after a slump in the pound. | Foreign firms have put the brakes on buying British rivals this year in response to Brexit uncertainty, despite the lure of snapping up businesses that have tumbled in value after a slump in the pound. |
| A study of UK buyouts and merger deals involving foreign firms showed that the value of purchases of British-owned businesses fell in the first nine months of the year to its lowest level since 2010. | A study of UK buyouts and merger deals involving foreign firms showed that the value of purchases of British-owned businesses fell in the first nine months of the year to its lowest level since 2010. |
| The internal study by the consultancy EY, seen by the Guardian, found that the value of deals so far this year was roughly two-thirds of the average reported over the last seven years. | The internal study by the consultancy EY, seen by the Guardian, found that the value of deals so far this year was roughly two-thirds of the average reported over the last seven years. |
| British firms are awash with cash after three years of bumper profits. The combination of strong balance sheets and the low pound was expected to make them the target of foreigns takeovers or mergers that involve selling a large portion of their business to foreign buyers. | British firms are awash with cash after three years of bumper profits. The combination of strong balance sheets and the low pound was expected to make them the target of foreigns takeovers or mergers that involve selling a large portion of their business to foreign buyers. |
| But EY said the lack of interest in buying UK firms “suggests a possible fall in confidence” as the UK’s economic prospects have become clouded in uncertainty. | But EY said the lack of interest in buying UK firms “suggests a possible fall in confidence” as the UK’s economic prospects have become clouded in uncertainty. |
| Mark Gregory, EY’s chief UK economist, said the UK was missing out on a global trend for an increasing number of mergers and buyouts, with firms in the eurozone experiencing a surge of cross-border activity in the last year. | Mark Gregory, EY’s chief UK economist, said the UK was missing out on a global trend for an increasing number of mergers and buyouts, with firms in the eurozone experiencing a surge of cross-border activity in the last year. |
| He said: “The fall in the value of foreign mergers and acquisitions of UK companies suggests a possible fall in confidence about the UK’s economic prospects. | He said: “The fall in the value of foreign mergers and acquisitions of UK companies suggests a possible fall in confidence about the UK’s economic prospects. |
| “There was a surge in foreign activity to $100bn in the two quarters after the referendum on EU membership, probably driven by the change in value of sterling, but this fell dramatically in the first quarter of 2017 to $6bn and total activity in 2017 to date is only just over $50bn.” | “There was a surge in foreign activity to $100bn in the two quarters after the referendum on EU membership, probably driven by the change in value of sterling, but this fell dramatically in the first quarter of 2017 to $6bn and total activity in 2017 to date is only just over $50bn.” |
| Each year, hundreds of foreign firms buy stakes in UK businesses or purchase a company outright to boost their presence in Britain or benefit from specialist technology and expertise. | Each year, hundreds of foreign firms buy stakes in UK businesses or purchase a company outright to boost their presence in Britain or benefit from specialist technology and expertise. |
| The mobile phone chipmaker Arm Holdings was bought last year by Japan’s SoftBank for £24.3bn in a move that was seen by government ministers as a vote of confidence in the UK economy after the referendum. | The mobile phone chipmaker Arm Holdings was bought last year by Japan’s SoftBank for £24.3bn in a move that was seen by government ministers as a vote of confidence in the UK economy after the referendum. |
| The international trade secretary, Liam Fox, welcomed figures in the summer that showed the UK attracted more than 2,200 new inward investment projects in 2016-17, a record number. | The international trade secretary, Liam Fox, welcomed figures in the summer that showed the UK attracted more than 2,200 new inward investment projects in 2016-17, a record number. |
| But the statistics published by the Department for International Trade (DIT) revealed new jobs created by foreign investment fell by 9% last year and the number of foreign-controlled companies reporting that they expanded revenues also fell. | But the statistics published by the Department for International Trade (DIT) revealed new jobs created by foreign investment fell by 9% last year and the number of foreign-controlled companies reporting that they expanded revenues also fell. |
| The department said 75,226 jobs were created in 2016/17, down from 82,650 in 2015/16. The number of firms that reported growing fell from 821 to 782. | The department said 75,226 jobs were created in 2016/17, down from 82,650 in 2015/16. The number of firms that reported growing fell from 821 to 782. |
| EY said large deals such as the Arm Holdings buyout made the figures volatile, but a slump in activity was visible this year. | EY said large deals such as the Arm Holdings buyout made the figures volatile, but a slump in activity was visible this year. |
| Gregory said British businesses had responded to the uncertainty created by the Brexit talks by buying foreign companies, though this had tailed off in recent months. He said the aim was to make themselves less reliant on the UK should it begin to suffer a slowdown when talks between London and Brussels conclude in 2019. | Gregory said British businesses had responded to the uncertainty created by the Brexit talks by buying foreign companies, though this had tailed off in recent months. He said the aim was to make themselves less reliant on the UK should it begin to suffer a slowdown when talks between London and Brussels conclude in 2019. |
| UK businesses were also buying domestic rivals, pushing figures for domestic takeovers to $59bn, the highest value since 2010. | UK businesses were also buying domestic rivals, pushing figures for domestic takeovers to $59bn, the highest value since 2010. |
| “The increased value of domestic activity appears to paint a different picture to the slowing international activity, but it is actually consistent with the implied fall in confidence suggested by the international activity,” Gregory said. | “The increased value of domestic activity appears to paint a different picture to the slowing international activity, but it is actually consistent with the implied fall in confidence suggested by the international activity,” Gregory said. |
| “What we are observing is increased defensive activity in the domestic market with businesses using M&A to generate revenue or operating synergies through buying scale and reducing competition.” | “What we are observing is increased defensive activity in the domestic market with businesses using M&A to generate revenue or operating synergies through buying scale and reducing competition.” |
| He said many of the deals were large companies hoovering up smaller rivals’ new skills and technology as an alternative to R&D. | He said many of the deals were large companies hoovering up smaller rivals’ new skills and technology as an alternative to R&D. |
| The UK’s GDP growth slowed this year to rank as the lowest in the G7. The Organisation for Economic Cooperation and Development (OECD) expects the UK growth rate to slip further next year, keeping it at the bottom of the growth league. | The UK’s GDP growth slowed this year to rank as the lowest in the G7. The Organisation for Economic Cooperation and Development (OECD) expects the UK growth rate to slip further next year, keeping it at the bottom of the growth league. |
| EY said its study, which covers deals worth more than $100m and excludes property deals, was a “a good guide to corporate sentiment” and Britain’s relative attractiveness as a destination for foreign investment. | EY said its study, which covers deals worth more than $100m and excludes property deals, was a “a good guide to corporate sentiment” and Britain’s relative attractiveness as a destination for foreign investment. |
| “The UK M&A market recovered slowly after the financial crisis but announced deal values recovered to post-crash highs in 2014 and 2015. The market slowed in 2016 and this trend has continued in 2017 with deal values and volumes well below those of 2015,” it added. | “The UK M&A market recovered slowly after the financial crisis but announced deal values recovered to post-crash highs in 2014 and 2015. The market slowed in 2016 and this trend has continued in 2017 with deal values and volumes well below those of 2015,” it added. |
| Mergers and acquisitions | Mergers and acquisitions |
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