By Michael Northcott Monday, 07 January 2013

2012 was UK's biggest mega-deal bonanza for three years

New data from Experian has shown that there was a rise of almost 5% in the value of UK mergers and acquisitions last year.

Any lawyer in the City will tell you that the M&A market in the UK was pretty subdued after the crash of 2008, but it seems 2012 was, by recent standards, a bumper year. Experian said that the number of deals worth more than £1bn in the UK rose 15% to 29 deals, which as a combined total were worth £128bn.

It is good news for the UK’s economic status when compared with other nations, because it outperformed the deal-size averages for the rest of Europe, the US and Asia too. All of those economies suffered declines in the total number of deals and the value of the transactions. 

The majority of the UK-based deals were international deals, which included foreign firms such as American pharmacy chain Walgreens purchasing a huge chunk of Alliance Boots for $6.5bn.

Unfortunately, the total number of deals fell 3% to 4,543, a situation which rapidly worsened in the final quarter (it suffered a drop of 11% in the number of deals being done compared with the previous year). But thanks to the few mega-deals that successfully went off, the total value of all transactions rose 4.8% to £242bn.

Easily the most active sector on the M&A scene, with 15% of all completed deals, was food and drinks producers. Diageo purchased Indian Firm United Spirits for £1.2bn, and Chinese food giant Bright Food purchased cereal firm Weetabix for the same amount.

Next on the list was the chemicals sector, with 13% of all deals, and then business and professional services deals with around 10% of the market.

It seems that banks may have slightly relaxed their lending policies over the last year, too, as the period saw an 11.9% increase in the number of deals financed by bank debt. 

Experian’s business development manager, Wendy Driver, said: ‘Despite the challenges faced by the eurozone crisis, the UK has proven to be one of the most attractive markets in what has been a subdued year for mergers and acquisitions globally.’

It's worth noting though that whilst deal activity moves a lot of cash around, it often involves foregin acquistion of UK firms - not so good for the autonomy of UK plc. Furthermore, the 'deal' is the bit the makes the headlines, but what really matters is how the combined firm performs three to five years downt the line.

The hard truth is that most mergers don't deliver miuch tangible improvement inside that timescale, posing the question of whether there is anything good about it for the UK, at all.

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