HCR Law Events

22 December 2022

The time is still right – cross-border M&A

Despite fears of a deep recession following on from the Ukraine war, supply chain issues, an energy crisis and 40-year high inflation, the case for cross-border merger and acquisition (M&A) activity still remains strong.

The latest report from the Office of National Statistics evidence a resilient M&A market, with the total number of domestic and cross-border M&A deals being relatively consistent from January 2022 to September 2022.

Further, the total value of inward UK M&A investment in Q3 2022 was £25bn, more than double the £11.1bn figure in Q2 2022.

Here’s why it is still a great time to complete cross-border M&A deals by investing in UK businesses.

Weak UK pound

Although the UK pound has recovered against the US dollar from the mid-year lows, the pound is still near all-time lows against the dollar. A weaker pound against other currencies means that UK businesses are still considerably cheaper than they were in preceding years.

Leader status in global industries

UK businesses are market leaders in key global industries such as utilities, renewables, logistics and pharmaceuticals. Investing in these businesses provides an attractive opportunity for foreign businesses looking to gain access to the UK’s expertise to deploy back home.

Market opportunities

As corporate insolvencies in the UK increase, many established businesses will inevitably fold, leading to large proportions of market share waiting to be gained by new entrants. Alongside this, businesses which may be struggling in the current economic climate may be more open to investment or takeover than ever before, providing an opportunity for foreign businesses to acquire reliable and reputed businesses in the UK market and operate through them.

Private equity reserves

With both private and public business valuations reaching eye-watering levels in the past two years fuelled by government stimulus, many private equity and corporate finance houses were seen sitting on their hands waiting for the right opportunity to invest in UK businesses. With interest rates on the rise and cooling valuations, more than $1.5 trillion in uninvested capital held by private equity houses is starting to be slowly but surely released into the M&A market.

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About the Author
Dr. Saverio Salandra, Partner, Corporate and International Teams

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