The value of takeovers of UK companies by overseas buyers fell 39% in the first quarter of the year to the lowest level since the pandemic, though the data picture was not as simple as it looked.
There were 426 domestic and cross-border mergers and acquisitions (M&A) completed in the first three months of the year that involved a change in majority share ownership, Office for National Statistics data revealed today, with a total value of £4.4 billion.
That number was down 18 compared to final quarter of last year, though the value was £3.5 billion higher.
Domestic M&A, where UK companies buy other UK companies, were valued at £3 billion, flat on the preceding quarter.
However, alternative M&A data from LSEG showed deals involving a UK target were 84% higher in value terms this year than during the same period a year ago. This data was first published by the Financial Times.
Inward M&A fell from £10.1 billion in the final quarter of last year to £6.1 billion, the lowest quarter since 2020.
In terms of total deals, January saw 174 deals, falling to 152 in February and declining further to 100 in March.
This only included completed M&A deals, so would not have included agreed deals such as for Direct Line, Currys and Wincanton, or offers since then, including for Co-Op Bank, Virgin Money, Royal Mail owner IDS and Hargreaves Lansdown.
The FT reported that hedge funds are becoming wary of making short bets against UK mid-cap stocks after having their fingers burnt by takeover bids in recent months, with overseas buyers attracted to low valuations as the FTSE 100 for instance is trading at 12 times forecast earnings compared to almost 22 times for US blue chips.
City figures said the UK public-to-private market has proven busy in recent months, referring to private equity and other owners buying listed companies.
The wave of dealmaking has come in response to a yawning valuation gap between UK stocks and markets elsewhere — particularly the US.
London’s FTSE 100 index trades at 12 times the estimated earnings of its members for the coming year, according to Bloomberg data. Wall Street’s benchmark S&P 500 index, in comparison, trades at about 21.8 times forward earnings.