The total number of takeovers and mergers involving UK companies dropped significantly in June as firms fielded high inflation, supply chain disruption and geopolitical tensions.
There were 333 completed mergers and acquisitions between April and June, according to figures from the Office of National Statistics.
This means there were 116 fewer deals than the previous three months and a decrease of 167 compared to the same period in 2021.
Furthermore, while the number of completed deals were virtually the same in April and May, totalling 131 and 130 respectively, the figure drops substantially in June to total just 72.
The Russian war in Ukraine could have had a knock-on effect on global deals with companies forced to reassess investment plans amid worsening economies, the ONS said.
A tough combination of rising costs, persistent supply chain disruption, recession fears and stricter regulation may have also caused UK companies to put takeover plans on ice, experts said.
However, the analysis revealed that the value of cross-border deals, both UK companies acquiring foreign companies abroad and vice versa, were higher in the latest quarter compared to the previous three months.
It totalled £4.5 billion, up by £2.2 billion and outweighing a £900 million drop in domestic deals, meaning UK companies acquiring other UK companies.
Victoria Scholar, head of investment at Interactive Investor: “Clearly, businesses are trying to geographically expand beyond their domestic borders, diversifying amid the market turmoil by consolidating with rivals overseas.
“Foreign businesses are also likely to be capitalising on the recent slump in the pound, particularly against the US dollar as well as this year’s 20% decline in the FTSE 250, making many UK businesses considerably cheaper than they were at the start of the 2022.”
Other experts pointed out that there is still an appetite for deal-making with many chief executives pursuing mergers that will help their firms grow in future.
Anna Faelten, a partner of corporate finance at EY UK, said: “We continued to see cross-border activity in sectors the UK has strengths in, including utilities, renewables, logistics, pharmaceuticals and life sciences.”
“Looking ahead, elevated levels of uncertainty mean the outlook looks challenging, however the fundamental mergers and acquisitions drivers remain intact which means we anticipate a steady flow of transactions in the remainder of the year.”
The total figure would have been boosted by German asset manager DWS completing its takeover of UK bus firm Stagecoach in June, in a deal worth £595 million.
Also in June, it was also announced that a £7 billion takeover of Morrisons by US private equity firm Clayton, Dubilier & Rice had been approved by regulators although this would not have been included in the data as it has not yet completed.