Global dealmakers : Cross-border M&A outlook 2019
Our international network Baker Tilly has released a global survey on cross border mergers and acquisitions (M&A).
The survey of 150 dealmakers based in the UK, Europe, the Americas, Asia and Australia asked for their views on a wide variety of dealmaking issues. The collated results can be found here, and they make an interesting read for UK business owners.
- Over three quarters of respondents looked at their domestic market as being most attractive and would focus on this more than looking overseas for acquisitions.
- One third of respondents believe that the risks posed by cross border dealmaking are more than outweighed by the opportunities that the right deal represents even in the current climate.
- Two thirds of overseas dealmakers believe that the mid market is most attractive (defined as deal values of between $15m and $500m) as they are often more flexible and easier to align with the overseas investor.
- Key drivers for overseas M&A are responding to trade barriers and tariffs (77%), reaching new customers (75%) and acquiring new technology or Intellectual Property (73%).
- Dealmakers are most concerned about regulatory hurdles (81%) and post merger integration issues (77%) when doing cross border deals.
- Ongoing issues surrounding Brexit negotiations are an issue for 32% of respondents and partly for this reason only 4% percent of respondents were looking to UK to acquire businesses; this was the lowest of all the European countries and only investment in Japan was less attractive.
- Despite Brexit uncertainties, the UK was attractive to overseas investors for its reliable infrastructure (100% of respondents looking to invest in the UK stated so) and for the valuations of its businesses (75%).
- Furthermore despite our sometimes negative self-perceptions of our economy, over 20% of respondents believed the UK was attractive for its availability of skilled labour and 30% for its political stability and legal certainty.
Our regional activity
These findings support the experiences of our Corporate Finance team’s regional activity. In the last four years, we have advised on seven completed deals involving international buyers and predominantly they were to acquire new products/technologies and to access new markets. Whilst the EU Referendum results did cause a couple of deals to collapse in 2016, there has been little obvious impact since, especially as the subsequent weakness of Sterling has made UK businesses more appealing to overseas investors.
Finally, from the UK business owner’s perspective, an overseas offer is no guarantee of successfully completing a deal as overseas investors still have to undertake their due diligence. In most cases this involved legal, business ethics, tax, environmental, commercial and human resources reviews in addition to the usual financial and technical due diligence. The intense nature of these due diligence process reflects the findings that 55% of respondents say that they have had a cross border deal collapse.
If you would like to discuss finding overseas investors, please contact Steve Plaskitt on 0191 285 0321.