The number of UK mergers and acquisitions fell to their lowest in March since 2020, as the rate of foreign companies buying British businesses almost halved throughout the quarter.
There were 426 M&A transactions in the first quarter of the year, 18 fewer than the previous quarter, data from the Office for National Statistics revealed today.
Acquisitions steadily declined throughout the quarter, totalling 174 in January, 152 in February, and just 100 in March, their lowest since August 2020.
The main cause of the decline was foreign companies acquiring UK companies, with deal volume dropping from £10bn in the fourth quarter of 2023 to just £6bn.
The main notable deal in the quarter was the acquisition of Neptune Energy by Eni and Var Energi, the ONS said.
While the amount spent UK companies acquiring foreign companies in the quarter saw a slight uptick, rising from £3.5bn to £4.4bn thanks to a strong January, the number of them was only 13 in March, the lowest since November 2020.
The amount spent on British companies acquiring other British companies stayed steady at £3bn, buoyed by the acquisition of LXi REIT by Londonmetric Property.
Stephen Rosen, head of corporate at Cooley, explained that the patchy economic sentiment in the first quarter had been reflected in M&A activity.
“As interest rates have settled, and with expectations that the next moves will be downwards, we are starting to see the green shoots of deal activity recovery,” he said.
“While there are still macroeconomic and global factors that mean confidence remains fragile, we are optimistic of a pick-up in M&A activity over the coming months.”
“At this stage, we don’t think the UK general election will have any material impact on M&A. It remains to be seen whether corporate America (strong buyers at this point) will aim to get deals closed well before the US election.”
Richard Olson, managing director at investment bank Lincoln International, said that while acquisitions were low, “we are now seeing a broader range of companies being able to be sold – in some cases with strong multiples”.
“Debt availability is becoming more predictable, centring on interest cover to determine debt capacity from credit funds and banks, with the limited number of new deals providing competitive tension for private credit spreads,” added Olsen.
“There is considerable pent-up demand to get deals done – private equity needs to sell companies to generate liquidity for limited partners, and there is a historically high volume of private capital dry power ready to be deployed in these transactions.”