UK M&A war chests brim over as deal market hots up

KPMG’s analysis shows that the capacity of UK corporates to fund inorganic growth, as measured by net debt to EBITDA ratios, is forecast to increase by 22 percent over the next twelve months, driven by healthy bottom lines and large corporate balance sheets.

Rod Wilkinson, KPMG’s Head of Corporate Finance in the North East, said:

“Today’s businesses can face the need to transform more radically and quickly than is possible via organic means. Both CEOs and shareholders know this, which is why M&A is a key driver for some companies seeking change. The good news for firms is that their capacity to transact is buoyant thanks to healthy balance sheets and swelling cash reserves.

“Looking at the North East, there continues to be an abundance of capital available from private equity firms for quality assets. Couple this with low interest rates, a favourable debt market, a relatively benign economic climate and a desire amongst corporates to disrupt, and it’s no coincidence that we see a healthy pipeline of M&A activity.

“Of course, it might not be plain-sailing. Geopolitical uncertainty, interest rate hikes in the US and increasing talk of protectionism in key markets could dampen enthusiasm to transact.”

UK firms a target for cross-border M&A

KPMG’s 2017 Global M&A Predictor also analysed historic transaction data both across regions and seven key sectors – Financial Services, Healthcare & Pharmaceuticals, Industrial Markets, Consumer Markets, Energy & Utilities, Chemicals & Basic Materials and Technology, Media & Telecoms.

The study found that while global deal activity was dominated by the US, targets from the UK accounted for a significant proportion of acquisitions, ranking second by volume for all but one of the sectors analysed. These findings echo new statistics published by ONS which report that 2016 saw 227 successful inbound deals in the UK worth £187.4 billion – the highest volume since 2011 and the highest annual value since the ONS first published M&A data in 1969.

Rod Wilkinson commented:
“International buyers are a real force to be reckoned with, especially as some have recently taken advantage of a weakened sterling. With no sign of a bounce in the pound on the horizon, and the UK economy confounding post-referendum expectations, I expect this region’s businesses to remain attractive to hungry investors.”