Record market close + Scottish deals
M&A activity still rising though risks emerge
Global hub: Standard Life HQ became home to a newly-merged business
Mergers and acquisitions activity around the world in 2017 pushed through the $3 trillion level for the fourth consecutive year and was headed in Scotland by the biggest ever deal between two indigenous companies.
The relatively weak pound is expected to spur more M&A activity in 2018. lt is also spurred by global economic growth, uncertainty over Brexit, subdued inflation in advanced and emerging economies, buoyant asset markets and historically low interest rates.
The Intralinks Deal Flow Predictor, with a proven track record for accuracy, forecasts that the number of worldwide announced M&A deals in Q1 2018 will increase by around 2% compared to Q1 2017.
Yet there are some indications of a weakening in activity. Notwithstanding data from Barclays indicating a greater willingness of growth firms to sell, early-stage M&A activity in the UK in the third quarter fell by 5% year on year and in Germany it fell by 8%, these being EMEA’s two biggest M&A markets.
A potential risk is that global equity markets are at record highs and therefore vulnerable to a correction. The S&P 500 has risen for 13 straight months to the end of November, an unprecedented streak. Global stocks, meanwhile, haven’t had a down month since October 2016, and even before December’s figures have been counted 2017 will be the year with the fewest monthly declines.
Europe has enjoyed double digit gains. Germany’s Dax is up 13%. While the FTSE 100 hit record highs this week, although the index is only 7.6% higher over the year. The FTSE 250, a broader measure of UK companies, is up 14.6% over the same period.
The blue-chip index closed today at a new record, up by 65 points (0.9%) at 7,687.77, repeating its record close on the last trading day of 1999.
The two leading US indexes have both risen by more than 20% so far this year. They have been further boosted by President Donald Trump’s sweeping tax reform. Under the changes, the US corporate tax rate will fall from 35% to 21% in 2018.
In Asia, the markets have enjoyed their best year since the aftermath of the financial crisis in 2009. The MSCI Asia Pacific Index, which tracks stocks across the region, has surged by almost 29% this year.
Hong Kong has enjoyed a stunning year – jumping by 36%, while South Korea posted a 22% gain and India rose by 27%.
Market buoyancy is a key factor spurring deals and the sectors most likely to see more M&A activity in the coming year are fund management, technology, energy.
At the micro level, there is an expectation that a consolidation is due among the craft brewers and distillers which have sprung up in recent years.
There is also a long-held view that more deals will be done in the media sector following Rupert Murdoch’s decision to sell much of his Fox Entertainment business and the pressures on the traditional revenue sources for print media. Trinity Mirror is pursuing Express owner Northern & Shell, while Johnston Press continues to be the subject of rumour and speculation.
In Scotland, the past year has seen a flurry of mergers among law practices, while the biggest deal of all involved two of its biggest fund managers.
Standard Life and Aberdeen Asset Management were forced to rush out confirmation of their plans for an £11 billion tie-up one Saturday evening in March after the news leaked.
The deal was completed in August, giving Scotland a new financial services giant that became the UK’s largest fund manager.
There was also activity in the energy sector, partly a result of government plans to cap rising consumer prices, a flight of customers to alternative suppliers and the growth of renewables. A merger of SSE’s household energy business with Npower will create a business second to Centrica, owner of Scottish Gas and should complete next year.
Among long-standing companies which surrendered their independence were Fishers Laundry, the law firm Maclay, Murray and Spens and the accountants Springfords and Campbell Dallas.
The deal that never was involved the proposed merger of FanDuel, established in Edinburgh, and its fantasy sports games rival Draftkings. FanDuel has been through a tough time with legal battles draining its resources. Daily Business revealed that it had decided against relocating to a new £50m development in Quartermile, Edinburgh. The company relocated its headquarters to New York.
There were three IPOs of Scottish companies in London, a rare uplift in the normal rate of flotations as boards saw an opportunity to hitch their wagons to rising stock market values. Daily Business revealed Glasgow-based Quiz Clothing’s plans to join the Alternative Investment Market and it was joined on the junior market by Springfield Properties and Beeks Financial.
Scottish M&A deals 2017 (click on links to read articles):
Standard Life merged with Aberdeen Asset Management
Advisers: Goldman Sachs, Fenchurch
Chrysaor acquired North Sea assets from Shell
Value: $3bn (£2.24bn)
Adviser / funder: Harbour Energy (EIG Global Energy Partners)
SSE announced merger of household energy business with Npower (talks ongoing)
Adviser: Credit Suisse
Wood Group acquired Amec Foster Wheeler
Advisers: JP Morgan Cazenove, Credit Suisse
Bridgepoint acquired Miller Homes
Advisers: Moelis, KPMG, Travers Smith, Linklaters, Savills, Marsh, Rothschild, DLA, JLL, White & Case, Jamieson Corporate Finance
Element Materials Technology acquired Exova
Adviser: Goldman Sachs and Investec
Quiz Clothing IPO
Adviser: Panmure Gordon
3i acquired further equity in Wireless Infrastructure Group
Greencoat UK Wind acquired Corriegarth Wind Farm
Springfield Properties IPO
Adviser: N+1 Singer
Hermes Investment Management buying Skypark (deal still to complete)
Value: £80m+ (est.)
Danish billionaire Anders Povlsen acquired Jenners building from Glen Properties
GLL Real Estate Partners Pan European Property Fund acquired Exchange Place 1
Adviser: GVA James Barr
Wood Group acquired of CEC Controls Company, Detroit
Value: $59m (£44m)
TechnipFMC acquired well-head business of Plexus Holdings
Adviser: Cenkos Securities, St Brides Partners
Wirefox acquired City Park (added to earlier deals for Capella, Rockford, Silvan House and Southergate Centre)
Value: £41m for City Park
Advisers: MacRoberts, DPL & Davidson McDonnell
Aggreko acquired Younicos
Adviser: Alexa Capital
K-Bro Linen acquired Fishers Laundry Group
Advisers: PwC corporate finance, Dickson Minto and Vialex
Wilsonart Engineered Surfaces (Texas) acquired Mermaid Panels and Shore Laminates
Adviser: EY, Shepherd + Wedderburn and Thorntons
UBS Asset Management acquired Quartermile 2
Advisers: CMS Cameron McKenna Nabarro Olswang, Brodies and GVA.
AAC Microtec acquired Clyde Space
Adviser: Nevis Capital
Beeks Financial IPO
Adviser: Cenkos Securities
International Hotel Properties acquired Holiday Inn Express Picardy Place, Edinburgh
Advisers: JLL and FRP Advisory
Macfarlane acquired Greenwoods and Nottingham Recycling
Adviser: Arden Partners
L Catteron acquired 27.9% of Innis & Gunn
Adviser: Noble & Co and Vialex
Menzies Distribution acquired EM News Distribution
James D Bilsland – acquired Andrew Gray & Co
Adviser/funder: Bank of Scotland
Marshall CDP acquired corner property, Blythswood Square, Glasgow
Advisers: GVA, Paul Hamilton Chartered Surveyors
Future Publishing acquired Team Rock titles
Advisers: FRP Advisory (administrator)
Minoan acquired Morningside Travel
Adviser: WH Ireland, Throgmorton Street Capital, Morgan Rossiter
Cairngorm Capital Partners acquired Thornbridge Sawmills
Advisers/funders: BDO, Addleshaw Goddard, CIL, JLT, Grant Thornton, Wright Johnston & MacKenzie. PNC Business Credit, Clydesdale Bank
Starwood Capital Group acquired Abstract
Adviser: CBRE, Ryden, JLL, Lambert Smith Hampton, CMS and Pinsent Masons
Baldwins acquired Campbell Dallas and Springfords
Adviser: Vialex (for Springfords)
Anderson Group acquired Alloy Bodies
Adviser / funder: HSBC
Skyscanner acquired Twizoo
Atlantis Resources acquired Simec
Value: Reverse takeover
Advisers: Evercore, Cantor Fitzgerald, Macquarie Capital
Lomond Capital acquired letting agents in Birmingham, Brighton and Manchester
Value: acquisition fund of £37.5m
Advisers included: Clydesdale Bank, Tosca Debt Capital,
Endless acquired Arran Aromatics
Advisers: KPMG (administrator)
Merkle acquired Aquila Insight
Advisers: GP Bullhound
Kiltane acquired parts of the Ness Clothing
Adviser: BDO (administrator)
Cello Signal acquired Tanami Media
Billy Walker acquired Glenallachie Distillery
Adviser: Macdonald Henderson
Cammach Recruitment acquired Bryant Group
Adviser: Hall Morrice Corporate Finance
Head Group acquired Change Recruitment
Adviser: FRP Advisory (administrator)
US investors headed by Chicago-based fund manager Richard H. Driehaus acquired Bonham Hotel, Edinburgh
Dynamic Edge acquired Waytime
Adviser / funder: Bank of Scotland
William Grant & Sons acquired Tuthilltown Spirits in New York State
MB Aerospace acquired Asian Compressor Technology Services
Concept Life Sciences acquired Aquila BioMedical
Mark Cavanagh acquired Oil Plus
Ogilvie Group acquired Active Auto Solutions
Deloitte acquired Market Gravity
Edwin James acquired Peterborough Electrical & Mechanical Engineering
Talon Business Solutions acquired Vozero
TV Squared acquired Wywy (Germany)
Ballantynes acquired the Edinburgh letting agent Ream
Menzies Distribution acquired London-based Gnewt Cargo
Ennismore acquired Bank of Scotland branch, St Andrew Square, Edinburgh
Entier acquired Wild Thyme
Edrington acquired Glenrothes Malt Whisky
Exova acquired SL Pharma Labs, Delaware
EnerMech acquired of EPS Group in Australia and the Americas
EnerMech acquired MInteg
Saint-Gobain acquired ScotFrame
Graham + Sibbald acquired Seymour & Co
TH Real Estate acquired Omni Centre
Liberty House Group acquired Shand Cycles
Staffline acquired Brightwork Recruitment
Aldomak acquired Handmade Meringue Company
Mosaic Architecture & Design acquired Burnet Bell
Arensis acquired Verdo
Value: Undisclosed (part of £50m UK-wide investment)
G1 Group acquired Scotsman Hotel
Netflix acquired Millarworld
1825 acquired Fraser Heath
Simec acquired Green Highland Energy
Legal sector mergers
ACA Press Cutters
Ice Factor Group
Adviser / funder: NatWest Bank, with advice from Chiene + Tait, Omnium Law and Kingsley Wood Solicitors
Adams Consulting Group
Advisers: McLaughlin Crolla, Bellwether Green and BTO
Adviser: Vialex, RBS
Adviser: Burness Paull
Adviser / funder: Clydesdale Bank