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East Midlands Chamber News

Investment at pre-recession levels

Investment from overseas and UK companies investing in foreign firms were both significantly up in the third quarter of 2013, according to global information services company Experian.

It said mergers and acquisitions deal values had returned to pre-recession levels.

The Nottingham-based firm revealed today revealed that 1,043 transactions totaling £122bn were announced in Q3 2013, up from £32bn in Q3 2012 – a three-fold increase and the highest quarterly total since Q2 2007.

There were 114 deals where an overseas business was acquired by a UK firm in Q3 2013 – a 7.5 per cent increase on the 106 deals in Q3 2012. Meanwhile, inward investment into the UK was up from 187 deals in Q3 2012 to 195 deals in Q3 2013, an increase of 4.3 per cent.

Although overall domestic mergers and acquisitions activity remained relatively subdued in terms of volume with the total number of transactions in Q3 2013 (1,043) constituting a decline of six per cent since Q3 2012 (1,114), Q3 deals were worth more than the aggregate total for the last four quarters in their entirety.

This can largely be attributed to Vodafone Group's £84bn sale of its US joint venture Verizon Wireless to joint venture partner Verizon Communications Inc. This was the second largest transaction in British corporate history, after Vodafone Group predecessor Vodafone Airtouch’s purchase of Mannesman AG for £109bn in 1999.

Elsewhere, smaller sized deals (worth £500,000 to £10m) saw a three per cent upturn in volume from 309 deals in Q3 2012 to 317 in Q3 2013 whereas mid-market transactions (worth £10m to £100m) saw a nine per cent decline.

The number of large deals (worth £100m plus) remained stable with 70 deals in Q3 2013. There were eight deals with a consideration worth more than £1bn announced in Q3 2013, up from five such transactions recorded for Q3 2012. Five of these deals involved overseas bidders, as high quality UK assets continue to attract foreign investors.

The UK’s manufacturing sector was the main driver of deal-making activity in the UK in Q3 2013, accounting for 31.1 per cent of the overall UK total.

With 29.5 per cent of deals, the next most active sector was financial services. Transaction values in this sector almost doubled from £13.5bn in Q3 2012 to £20.2bn in Q3 2013.

Other growth sectors included mining and quarrying, which saw deal volume rise by 27.3 per cent (from 88 in Q3 2012 to 112 in Q3 2013) and transport and travel, up by 44.8 per cent, from 54 to 88 deals.

As with the UK, Europe saw a slight reduction in transaction volume but a substantial upturn in deal value, from £113.5bn in Q3 2012 to £202.9bn in Q3 2013, an upturn of 78.8 per cent. The bulk of these deals came from the manufacturing and financial services sectors.

North American deal volumes were down by 28.4 per cent (from 1,929 deals in Q3 2012 to 1,381 in Q3 2013), but the aggregate value of transactions increased by almost £100bn, to £276bn. North America returned strong activity in its information technology and professional services sectors in Q3.

Meanwhile, activity in the Asia-Pacific region has been relatively lackluster so far this year; volume was down 31.6 per cent (from 2,104 deals in Q3 2012 to 1,439 in Q3 2013), without the increase in value recorded elsewhere (total deal value slumped from £139bn in Q3 2012 to £82bn in Q3 2013).

Wendy Driver, Business Development Manager at Experian UK&I, said: “Although deal volumes remain somewhat suppressed, the UK returned a robust set of results in Q3, with an upturn in large corporate transactions, strong value figures and encouraging activity in the manufacturing, mining and transport sectors.

"While certainty remains in short supply, the recent economic news coming out of the UK is reassuring and with increased reports that the number of deals in the pipeline is on the up, a stronger more robust M&A market might be closer than we thought.”

DNCC will announce the results of its Third Quarterly Economic Survey tomorrow (00.01hrs 8/10/13). To read the story once it goes live click this link.

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