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British deals slump during lockdown as firms pause M&A

Suban Abdulla
·2-min read
While there was a sharp fall in outward deals by number, there was a rise in the value of takeovers of foreign companies by UK rivals at £4.4bn in Q2
While there was a sharp fall in outward deals by number, there was a rise in the value of takeovers of foreign firms by UK rivals at £4.4bn in Q2. Photo: Getty

The number of mergers and acquisitions (M&A) involving UK companies screeched to a halt during the height of the coronavirus lockdown as firms scrapped non-essential spending.

Data from the Office for National Statistics (ONS) shows the pause caused the value of UK takeovers by foreign rivals to plummet to a near six-year low between April and June 2020.

According to the latest ONS figures, the number of M&A involving UK firms fell to 152 in the second quarter, down by 67% on the previous quarter and a third lower than the same period last year. The figures were down 311 from the previous quarter (463 deals) and 292 during Q2 2019 (444 deals).

In May, only 37 deals were completed — significantly below the 165 deals made in May 2019 — and down from 58 in April, but transactions crept back up to 57 in June.

READ MORE: 1 in 10 firms fear going bust due to COVID-19 debt

The value of domestic M&A between UK companies dropped to levels not seen since 1975, totalling just £300m ($391m) between April and June, down considerably from £3.1bn in Q1 of 2020.

In the three months to June, foreign companies spent £2.1bn on UK acquisitions, down 89% year-on-year, and the lowest value since 2014.

While there was a sharp fall in outward deals by number, there was a rise in the value of takeovers of foreign companies by UK rivals at £4.4bn in Q2 — up from £4.1bn in the second quarter of 2019 — and more than double the £1.7bn seen in Q1 2020.

The biggest outward deals included Bodycote’s £162m takeover of Ellison Surface Technologies in the US, according to the ONS.

GlaxoSmithKline’s (GSK.L) sale of its consumer healthcare arm in India to Unilever, which was first announced in 2018, was also a notable outward disposal of the second quarter.