It may be a cliché, but it is true – the Americans are overwhelming, over here, and busy picking over the best that Britain’s corporate world has to offer.
Since the start of the year, the information group Thomson Reuters estimates there have been 50 US-to-UK merger and acquisition deals with a total value of £6.9bn.
Such American deal activity is clearly continuing to pick up, despite the uncertainty around the upcoming election and deflationary fears in Europe.
Earlier this month Ball Corporation, the giant Colorado-based can maker, agreed a £4.4bn deal to buy its UK rival, Rexam, in a takeover that would merge the world’s two largest makers of “smart cans”. If regulators agree to the deal, then the listed Rexam – which churns out 62bn cans a year – will become the latest British company to fall to an overseas competitor.
Rexam will follow Trainline, the online rail ticketing group, which announced plans to float in January only to derail the process days later by agreeing to a knock-out bid of more than £500m from KKR, the American buy-out group.
The potential for further big-ticket American takeovers of British companies looks more viable than ever. Even with the pound enjoying a little rally in recent weeks off the back of a stronger economy and improved Bank of England interest rate expectations, the dollar is still strong against sterling. Not to mention that many American companies are still valued at a premium to those listed in London, making shopping trips to Europe look ever more attractive.
Richard Goold, a corporate partner at law firm Wragge Lawrence Graham & Co, says he is seeing more American private equity houses considering taking private British-listed companies than in “many years”. He predicts it will become a significant feature of the deal market during the next 12 months.
It helps that many of the large American private equity groups are truly flush with cash. Blackstone, for example, said last month as it reported record full-year results for 2014 that it had received a significant inflow of $57bn (£37bn) in funds, to take
its total assets under management to a new high of $290bn.
The private equity giant, which is extremely active in Europe’s real estate and leisure sectors, performed so well last year that Stephen Schwarzman, its billionaire co-founder, was able to add another $690m to his fortune. His remuneration package was up by more than $200m on the previous year and was one of the biggest paydays in Wall Street’s history.
It will not be an open goal for the Americans though, as they are facing stiff competition, particularly from Japanese and Hong Kong companies, which have also been extremely active, most notably Hutchison Whampoa, which has made a £10bn swoop on O2, the mobile phone company.
There will be a number of other British companies high on the target list for overseas suitors, such as Rolls-Royce, the aircraft engine group, and Cobham, the defence group. UBS analysts recently ran the rule over potential engineering targets in Britain, singling out Cobham, Meggitt and Ultra Electronics.
It is not just British engineering where the buyer universe is heavily skewed towards US buyers. The country’s technology sector has always provided rich pickings and already CSR, Wolfson Microelectronics, Psion and Logica have fallen to the Americans.
Smith & Nephew, the artificial joint manufacturer, remains a perennial takeover target in the healthcare sector after Stryker, its aptly named US rival, ruled out a bid last year.
Whichever sector you look at, last year the value of all US-to-UK cross-border deals hit £20.6bn – double the 2013 haul. It could have been higher too, if the £34bn “mega deal” between Abbvie and Shire, or Pfizer’s abortive £63bn mission for AstraZeneca, had succeeded.
However, the market has yet to reach the £31.4bn spent by eagle-eyed American investors in 2011, but the strong start to the year indicates this latest star-spangled invasion still has some way to run.
Deirdre Hipwell is mergers and acquisitions correspondent at The Times
