International M&A into the UK

Cross-border M&A into the UK has been on an upward trajectory for an extended period, a trend which has continued over the last four years despite the turbulence experienced by the UK economy.

Following a relatively ‘normal’ year in 2019, 2020 saw the UK face into the Covid-19 pandemic, lockdowns and significant economic uncertainty. Consequently, both cross-border and local M&A activity reduced year-on-year. Emerging from 2020, 2021 saw the end of the Brexit transition period, lower interest rates and the weakened pound present more favourable opportunities to foreign investors, thus inflating M&A into the UK. Finally, as we progressed through 2022, the war in Ukraine, supply chain issues, rising interest rates and the cost-of-living crisis moved the dial again, deflating volumes back to just above pre-pandemic levels.

Source: ONS

If we strip back these factors, the underlying trend displayed is a steady and consistent growth of cross border M&A into the UK, driven by factors which have held true throughout the period. The UK possesses a highly skilled workforce, advanced infrastructure and high-quality assets, a stable economic environment and is a world leader in the financial and professional services industries. As such, as of January 2023, the UK became only the third trillion-dollar tech economy (behind US and China). It ranked top of European countries in the world banks list for best places to do business and ranked third in PwC’s CEO survey for best countries to invest in (behind US and China). These overriding factors continue to bolster the UK as a destination for foreign investment and as a key location for investors and companies when looking to expand their international footprint.

These trends are very much aligned to our experience as we continue to engage with potential international buyers on behalf of our UK clients. Over the last twelve months, we have been engaged on five transactions where the ultimate purchaser has been a non-UK entity. When considering an international buyer pool and engaging with foreign investors, it’s important to have an experienced advisor by your side to provide sufficient access. Building an international network has been key to our recent successes, by combining our own informal network with our membership of IR Global, a global network of advisors representing over 165 jurisdictions. We remain well placed to reach a large international pool of buyers.

Further to providing sufficient reach, your advisors are there to guide you through the nuances that often come with the transaction. International purchasers can often bring different cultural expectations, business practices and regulatory reporting requirements. Considering these upfront and how well-suited the ongoing business is to meet these is a key consideration in all transactions, especially when significant value is being rolled into the new structure. Transactionally, it’s important that the sale documents are governed by UK law and that the terms of the SPA are understood by all parties especially in instances when the investment is their maiden UK acquisition.

Every transaction poses its own unique set of challenges, but having an experienced corporate finance advisor by your side can help you navigate these challenges whilst protecting your interests. Although M&A volumes have cooled, the UK market remains attractive to foreign investors, and we recommend discussing this route as part of your preparation for a transaction. If you would like to explore this further, please do not hesitate to get in touch with a member of our team.

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