Surge in M&A activity

Global Scots firms in eye of overseas predators

Scottish companies with access to global markets will continue to attract the attention of international bidders, according to a new report.

It comes amid a surge in mergers and acquisitions activity across the UK which has reached levels last seen in the first quarter of 2007, the high watermark for deals activity.

First quarter deals this year totalled $120bn against $147bn in the same period 11 years ago.

Ally Scott (pictured), head of corporate finance in Scotland for EY which produced the data, said: “It’s been a positive start to the year for the UK deals market with international investors continuing to find UK companies with an international presence attractive and UK businesses making international deals.

“Evidence of the attractiveness of Scottish businesses to international investors has built momentum in recent months and looks set to continue.

“Those with access to global markets and the knowledge of how to capitalise on M&A opportunities will be best placed for successful outcomes.

“The significant increase in inbound transactions is likely to lead to a new environment for M&A and deal makers.

“Some of these deals are likely to face increased scrutiny by regulators, Government and the public about their purpose, which will need to extend beyond cost savings. Articulating this narrative in a compelling way to ensure all stakeholders are onside will become increasingly key to help ensure deals are done.”

Telecommunications ($44.6bn), automobile ($18bn) and healthcare ($13.5bn) top the list of sectors with the highest transaction values, while computers and electronics together with professional services saw the most deals with 151 and 105 transactions respectively.

UK/US special M&A relationship remains strong

US investors topped the list of foreign acquirers buying UK firms followed by France, Switzerland, Japan and the Netherlands.

The first quarter of 2018 saw 68 deals from the US into the UK worth $60bn. At the same time, the US was the second most favoured destination for UK companies doing deals abroad ($4bn, 38 deals), after Switzerland and followed by Germany, Oman and France.

Mr Scott continued: “The trade flow between the UK and the US has always been strong and there is no sign of slowing.

“Shifts in policy, such as the recent US tax reforms, could trigger some near-term large deals, as boardrooms reassess capital allocation between the US and non-US territories. 

“We predict Q2 to be equally strong as businesses look to lock in more favourable financing prior to any interest rate increases.

“However, the biggest M&A story of this year will be portfolio transformation. Because of the relatively low growth of the economy, employment concerns and technological change businesses are under more pressure to find different, better and smarter ways of operating.

“They are unable to carry non-core assets and will continue to evolve through the acquisition of technology and digital innovations.

“Tech smart deals will help companies future-proof their operations and address continuously changing business models.”

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