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Statistical bulletin: Mergers and Acquisitions Involving UK Companies, Q4 2014 This product is designated as National Statistics

Released: 03 March 2015 Download PDF

Key Points

  • 2014 saw total domestic and cross border mergers and acquisitions involving UK companies fall to the lowest numbers recorded since 1987, when ONS first published overall total M&A figures.
  • In both Q3 and Q4 2014 total domestic and cross border mergers and acquisitions continued to report lower levels of activity than seen before the 2008-09 economic downturn.
  • In 2014 20 completed acquisitions of UK companies made by foreign companies (inward M&A) were reported. This is the lowest quarterly figure reported since Q1 2013 when 19 acquisitions were recorded.
  • During 2014 there were 105 acquisitions of foreign companies made by UK companies (outward M&A) compared with 58 recorded in 2013, a year-on-year increase of 81%.

Your Views Matter

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. Please contact us via email: m&a@ons.gsi.gov.uk or telephone Michael Hardie on +44 (0)1633 455923.

Summary

Mergers and Acquisitions (M&A) transactions which result in a change of ultimate control of the target company and have a value of £1 million or more are included in this release. Information on the number and value of transactions are reported, in addition to whether transactions are acquisitions or disposals. 

Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals These statistics are presented on a ‘current price basis’, which are prices as they were at the time of measurement and are therefore not adjusted for inflation.

During Q4 2014 the total number of domestic and cross border M&A involving UK companies remained relatively flat when compared with Q3 2014 and with the same quarter of the previous year (Q4 2013). There were a total of 89 completed domestic and cross-border M&A involving UK companies in Q4 2014. This total includes 40 domestic acquisitions, 26 outward acquisitions, 20 inward acquisitions and three inward disposals. This represents a decrease of 9% on the previous quarter (98) and also a year-on-year decrease of 16% on the number of domestic M&A recorded in Q4 2013 (106).

Overall 2014 saw total mergers and acquisitions activity involving UK companies fall to lower levels than experienced during the depth of the 2008-09 economic downturn and are the lowest on record since 1987, when ONS first published overall M&A data. There were a total of 376 domestic and cross border acquisitions which completed during 2014 compared with 437 in 2013, a reduction of 61 acquisitions. This represents a 14% year-on-year decrease overall of total M&A activity.

Between 2009 and 2014 the overall total average number of domestic and cross border M&A was recorded as 585 acquisitions. This total comprised of 277 domestic acquisitions indicating that this was the highest average level of M&A during the six year period, compared with inward acquisitions (160) and outward acquisitions (148).  During 2009 the average number of domestic and cross border M&A recorded 172 completed acquisitions before then increasing to 299 in 2011. Thereafter the average level of overall total M&A gradually declined year-on-year falling to 125 acquisitions in 2014, the lowest annual average figure recorded since 1987.   

The quarterly numbers and value of M&A activity are prone to large quarter-on-quarter movements as these data relate to specific ‘one time’ only transactions, for example one quarter can be heavily impacted by one large transaction. Therefore it can be more appropriate to analyse trends over time. Overall, during the fourth quarter of 2014 the total number of domestic and cross-border mergers and acquisitions involving UK companies remain at much lower levels of activity than before and immediately after the 2008-09 the economic downturn.

Figure 1: Number of acquisitions involving UK companies 1987 - 2014

Figure 1: Number of acquisitions involving UK companies 1987 - 2014
Source: Office for National Statistics

Notes:

  1. Please click on image to enlarge.

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Recent M&A statistics can be put into context by comparing the low levels of recorded M&A activity involving UK companies during Q4 2014 and for 2014 as a whole, over consecutive five-year intervals since 1997 (Table 1 below).

At Q4 2014 the average number of acquisitions abroad made by UK companies (26) remained broadly comparable to the quarterly numbers recorded since 2012 (24).

The number of completed domestic acquisitions between UK companies reported in Q4 2014 (40) showed a fall of 29% when compared with the average of 56 acquisitions recorded during 2012- 2014 Q4.

Similarly to domestic M&A, the average number of acquisitions of UK companies by foreign companies  during 2012 - 2014 Q4 (33) saw a fall of inward M&A activity when compared with the number of completed acquisitions  recorded in Q4 2014 (20), a decrease of 39%. 

The average value of inward M&A per transaction has also fallen during Q4 2014 (£133,000) when compared with the average values reported since 2012 (£159,000) a decrease of 16%. This is in contrast to the average estimated values seen for domestic (£40,000) and outward M&A (£438,000) at Q4 2014, which when compared with 2012-2014 Q4 previous average values of £28,000 and £162,000, show increases due to the inclusion of some high valued acquisitions that completed in the final quarter of 2014.   

Table 1: The average number and value of M&A involving UK companies, grouped into five year intervals

  Abroad by UK companies   Overseas companies in the UK   Between UK companies
Number Value Average Number Value Average Number Value Average
£million £million £million £million £million £million
1997-2014 Q4 80 10,435 130 49 9,462 193 126 6,425 51
1997-2001 128 20,402 159 54 9,900 183 136 10,921 80
2002-2006 79 6,812 86 46 9,203 200 164 6,448 39
2007-2011 67 8,014 119 54 11,813 219 121 4,807 40
2012-2014 Q4 24 3,894 162   33 5,244 159   56 1,591 28
Q4 2014 26 11,393 438 20 2,658 133 40 1,617 40

Table source: Office for National Statistics

Table notes:

  1. The deal identification threshold has been increased at Q1 2010 from £0.1m to £1.0m and as a consequence there may be a discontinuity in the number and value of transactions reported.
  2. Average value per transaction.

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Domestic M&A Transactions

There were 40 acquisitions of UK companies by other UK companies in Q4 2014 involving a change in majority ownership.  This is similar to the number of completed acquisitions recorded in Q3 2014 (42) and represents a marginal decrease between both quarters of approximately 5%.

During Q4 2014 the value of domestic M&A was reported as £1.6 billion. This is the same value previously recorded at both Q1 and Q2 2014. However, the Q4 2014 value of domestic M&A (£1.6 billion) shows a considerable decrease of 49% when compared with the value reported at Q3 2014 (£3.2 billion).

Figure 1A: Total number of acquisitions of UK companies by other UK companies 2011-2014

Figure 1A: Total number of acquisitions of UK companies by other UK companies 2011-2014
Source: Office for National Statistics

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Domestic M&A activity continued to decline during 2014, a decrease on the low number previously recorded in 2013 and also during the years before the 2008-09 economic downturn. This may be largely explained by the increase in the number of International Public Offerings (IPOs)  reported during  2014 and  to the continued restrictions in bank lending to small and medium sized businesses.

The estimates for the total number of domestic M&A continued to be dominated by acquisitions of independently controlled companies.  The acquisition of an independent company means the purchase of a company in its entirety, whereas the acquisition of a subsidiary means the purchase of only a part of a company, between 50.1% and 100%.

Of the total 173 domestic acquisitions, 80% involved independent controlled UK companies, while 20% were for acquisitions of subsidiaries that were part of larger companies.

UK companies spent £8.0 billion when acquiring other UK companies during 2014. The vast majority of this expenditure (65%) involved cash transactions, while acquisitions involving the issue of ordinary shares accounted for the remaining 35%.

Inward M&A Transactions

The number and value of acquisitions of UK companies by foreign companies (inward M&A) saw a continued decline of activity in all four quarters of 2014.

There were 20 inward acquisitions involving a change of majority share ownership in Q4 2014, similar to the number in Q3 2014. However, Q4 2014 recorded the lowest number of quarterly inward M&A activity since Q1 2013 (19) and some 33% lower than the number recorded previously at Q4 2013 (30 acquisitions).

During Q4 2014 the total value for inward acquisitions also declined, falling to approximately £2.6 billion, compared with £3.6 billion recorded in the previous quarter (Q3 2014).

Figure 1B: Total mergers and acquisitions in the UK by foreign companies 2011- 2014

Figure 1B: Total mergers and acquisitions in the UK by foreign companies 2011- 2014
Source: Office for National Statistics

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For 2014 as a whole, both the number and value of inward M&A involving a change of majority share ownership have fallen to the lowest levels of activity recorded since Q1 1987 when inward M&A was first collected and published. 

During 2014 there were a total of 98 acquisitions of UK companies by foreign companies, a decrease of 43 when compared with the number recorded in 2013 (141), although on a par with the number reported in 2009 (112 acquisitions) during the period of economic downturn.

The majority of the 98 inward acquisitions of UK companies which completed in 2014 were made by companies in The Americas (45%) and Europe (42%).

Outward M&A Transactions

The number of completed acquisitions abroad by UK companies stayed consistent between Q2 2014 and Q4 2014, yet continued to show relatively low levels of outward M&A activity. There were 26 acquisitions abroad involving UK companies during the final quarter of 2014, broadly comparable to Q2 2014(25) and Q3 2014(24).

During the fourth quarter of 2014 UK companies spent considerably more on acquisitions of foreign companies abroad compared with previous quarters, recording a value of £11.4 billion. This considerable increase in the value of outward M&A is primarily driven by three substantive-valued acquisitions which completed during Q4 2014.  

Figure 1C: Total number of mergers and acquisitions abroad by UK companies 2011- 2014

Figure 1C: Total number of mergers and acquisitions abroad by UK companies 2011- 2014
Source: Office for National Statistics

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Outward M&A activity experienced an upturn during 2014 for both the number and value of acquisitions involving a change of majority share ownership.

In 2014 there were a total of 105 acquisitions of foreign companies abroad made by UK companies, compared with 58 acquisitions recorded previously in 2013, a year-on-year increase of 81%. However, compared with both 2011(286) and 2012(122) the number of acquisitions have fallen.

Of the 105 outward acquisitions which completed in 2014 the most noticeable countries in which UK companies undertook M&A were in Europe (41%) and The Americas (38%).    

Transactions in the UK by Other UK Companies

In Q4 2014 there were 40 acquisitions of UK companies by other UK companies, involving a change in majority ownership. This is similar to the number of completed acquisitions recorded in Q3 2014 (42) and represents a marginal decrease between both quarters of approximately 5%.

Of these 40 domestic transactions there were 36 acquisitions involving UK independent companies representing the majority (90%) of total acquisitions in Q4 2014, while acquisitions of subsidiaries involving UK company groups accounted for the remaining 10%.

During Q4 2014 the total value of domestic M&A was reported as £1.6 billion, a decrease of 49% when compared with the value reported in the previous quarter of £3.2 billion.

Significant domestic acquisitions, valued at £100 million or more, that took place during Q4 2014:

Figure 2: Quarterly Value and number of acquisitions of UK companies by other UK companies 2006 – 2014

Figure 2: Quarterly Value and number of acquisitions of UK companies by other UK companies 2006 – 2014
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million. There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition).

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Throughout 2014 the estimates for the numbers and values of domestic acquisitions remained relatively stable, reporting similar levels of M&A activity at each quarter of the year.

Of the 173 acquisitions of UK companies by other UK companies during 2014, it was notable that Q2 saw the highest level of M&A activity, at 51 acquisitions. In contrast, the number of domestic acquisitions in Q1 and Q4 2014 were both recorded as 40, with a slightly higher number reported in Q3 2014 (42).

The total value of domestic acquisitions for 2014 was £8.0 billion with approximately £1.6 billion being reported in three out of the four quarters.  Q3 2014 saw the highest level of domestic M&A, reporting £3.2 billion, with one large acquisition accounted for the majority of this value.

Figure 2A: Value and number of acquisitions of UK companies by other UK companies 1987 - 2014

Figure 2A:  Value and number of acquisitions of UK companies by other UK companies 1987 - 2014
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million. There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition).

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There were 173 acquisitions involving a change of majority ownership in 2014, 65 fewer than in the previous year. 2014 saw the lowest number of domestic M&A recorded since ONS first began publishing this series of data.

The total value of domestic acquisitions in 2014 was £8.0 billion. This was a slight increase (4%) when compared with the value of £7.7 billion reported in 2013 and remains well below the values reported since before the 2008 economic downturn. 

Overall UK domestic M&A activity has continued to decrease, a trend which was first seen in 2008 and may indicate a degree of caution still exists for UK companies before they fully commit to M&A. This may be due to companies being more specific about the M&A they undertake in order to be certain of enhancing and transforming their business for the future.

Figure 3 Summary of mergers and acquisitions in the UK by UK companies

Figure 3 Summary of mergers and acquisitions in the UK by UK companies
Source: Office for National Statistics

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It is possible to split out the number of domestic mergers and acquisitions into those made by independently controlled companies and those which are subsidiaries. The acquisition of an independent company means the purchase of a company in its entirety, whereas the acquisition of a subsidiary means the purchase of only a part of a company, between 50.1% and 100%.

During 2014 there were 138 acquisitions of UK independently controlled companies worth £6.1 billion, compared with 175 acquisitions valued at £4.1 billion reported in 2013. Although fewer domestic acquisitions completed during 2014, those that did were seen to be of a higher value.

The number and value of acquisitions for domestic subsidiaries also decreased in 2014 falling to 35 acquisitions worth £1.9 billion compared with 63 acquisitions worth £3.5 billion in 2013.

Figure 3A: Summary of mergers and acquisitions in the UK by UK companies, 1987-2014

Figure 3A: Summary of mergers and acquisitions in the UK by UK companies, 1987-2014
Source: Office for National Statistics

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Other notable domestic acquisitions, valued at £100 million or more, that took place during 2014:

 QUARTER 1

 
 QUARTER 2

 QUARTER 3

Transactions in the UK by Foreign Companies

Between Q3 and Q4 2014, the number of UK companies acquired by foreign companies (inward M&A) fell by approximately 13%. There were 20 completed inward acquisitions recorded in Q4 2014 compared with 23 in the previous quarter, showing a continued decline for inward M&A activity since Q3 2013 when 59 acquisitions were reported.    

During Q4 2014 both the number and value of inward disposals of UK companies by foreign companies recorded lower levels of M&A compared with Q3 2014. There were nine disposals valued at £1.2 billion in Q3 2014 compared with three disposals valued at £87 million in Q4 2014.  Similar to inward M&A, this low number of inward disposals recorded at Q4 2014 reflects a pattern of continued decline seen since Q4 2011 when 22 completed disposals were reported.

Figure 4: Value and number of acquisitions in the UK by foreign companies

Figure 4: Value and number of acquisitions in the UK by foreign companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition).

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The value of acquisitions in the UK made by foreign companies (inward M&A) decreased by approximately 25% between Q3 and Q4 2014, from £3.6 billion to £2.7 billion. However, year-on-year comparisons show the value of inward M&A has increased by 35%, up from £2.0 billion reported in Q4 2013 to £2.7 billion in Q4 2014, the highest Q4 value recorded since Q4 2011 (£12.4 billion).

The following inward significant transactions, valued at £100 million or more, took place during Q4 2014:

Fig 4A: Value and number of acquisitions in the UK by foreign companies, 1987 -2014

Fig 4A: Value and number of acquisitions in the UK by foreign companies, 1987 -2014
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition).

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The comparison of yearly trends for inward M&A shows that the estimate for the number of completed UK acquisitions in 2014(98) fell to similar levels to those seen during 1987 and 1988 when the numbers of acquisitions were reported as 61 and 99 respectively. From 1988 inward M&A activity increased steadily until reaching a peak in 2007 (269 acquisitions) before then seeing a gradual decline of inward activity during 2008. This has continued year on year through to 2014.

Further analysis of the trends in the value of inward M&A shows foreign companies spent £13.7 billion on acquisitions of UK companies during 2014.This represents a considerable decrease of 57% when compared with the value of £31.8 billion previously reported in 2013.

Historically the values of inward acquisitions have recorded volatile levels of activity since figures were first published in 1986. The largest value for inward acquisitions (£82 billion) was reported in 2007and thereafter a downward trend evolved with values gradually declining to the low values reported in 2012 (£17.4 billion) and 2014 (£13.7billion).

The low levels of M&A inward activity during 2014 may be due to various economic factors such as low global economic growth, continued political instability abroad and the fall in the value of the euro and other foreign currencies.

During 2014, the number and value  of disposals of UK companies by foreign companies involving a change in majority ownership (20) continued to record low levels of activity similar to the numbers reported in both 2012(27) and 2013 (26).

Other inward notable transactions, valued at £100 million, which took place in the UK by foreign companies during 2014:

QUARTER 1


QUARTER 2

QUARTER 3

Figure 5:Area analysis of acquisitions in the UK by foreign companies, 2005-2014

Figure 5:Area analysis of acquisitions in the UK by foreign companies, 2005-2014
Source: Office for National Statistics

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During 2014 all areas of the world recorded much lower inward M&A activity than in previous years and even lower than the dip in numbers of inward acquisitions reported at 2009, when 112 inward acquisitions were reported.

Slow global economic growth and the fall in the value of the euro, combined with lack of confidence in the stability of global M&A markets, may indicate foreign companies found it difficult to generate the internal funding required for M&A.  In addition foreign companies may still remain cautiously optimistic about M&A home and abroad and thus adopt a ‘risk aversion’ approach, causing them to continue to refrain from making any substantial investment in the UK during 2014.

Transactions Abroad by UK Companies

In Q4 2014 there was an 8% increase in activity of the number of acquisitions abroad (26) made by UK companies compared with Q3 2014. The number of outward acquisitions has remained stable to the numbers reported in Q2 (25) and Q3 2014 (24). From the number of acquisitions of 30 in Q1 2014 they fell for the rest of the year and remained relatively flat.

During Q4 2014 the value of acquisitions was recorded as £11.4 billion which can be explained by three significant acquisitions (acquisitions over £100million) that completed in the quarter. In Q3 2014 the figure was £4.5 billion. Q4 2014 saw the highest value of acquisitions taking place, compared to £1.9 billion in Q1 2014. There was a noticeable increase in the value of acquisitions abroad by UK companies from Q1 2014 to Q4 2014. Q4 2011 was the last time a similar value was reported (£12.6 billion). Q2 2000 still shows the highest value of acquisitions abroad made by UK companies with a figure of £129.0 billion.

Figure 6: Value and numer of acquisitions abroad by UK companies

Figure 6: Value and numer of acquisitions abroad by UK companies
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition).
  3. * Denotes disclosive figures.

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There were 105 acquisitions for the whole of 2014; not since 2012 has there been a similar number of acquisitions recorded with 122. If UK companies are not confident in the global M&A market they may not invest. As such this is a possible obstacle for companies engaging in M&A abroad. The level of M&A activities abroad by UK companies throughout 2014 (105) has decreased compared with a peak of 441 in 2007.

The following outward notable transactions, valued at £100 million or more, took place during Q4 2014:

Figure 6A: Value and number of acquisitions abroad by UK companies 1987-2014

Figure 6A: Value and number of acquisitions abroad by UK companies 1987-2014
Source: Office for National Statistics

Notes:

  1. At Q1 2010 the deal identification threshold for the mergers and acquisitions surveys was raised from £0.1million to £1.0million There is therefore a discontinuity in the number of transactions reported as illustrated above.
  2. All values are at current prices (see Background Notes for definition
  3. * Denotes disclosive figures.

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The total value of acquisitions made abroad by UK companies for the whole of 2014 was £20.3 billion, similar to the value of £17.9 billion reported in 2012. 2000 saw the highest recorded value on record of £181.0 billion. Since 2007 when the value of acquisitions made abroad by UK companies was £57.8 billion, the presiding years saw a decrease in the value of acquisitions to £10.1 billion in 2009. In 2010 there was a slight increase in the value of acquisitions to £12.4 billion, and subsequently a larger increase to £50.2 billion in 2011. The 2014 figure of £20.3 billion represents  a 65% decrease compared to the figure recorded in 2007. Although acquisition values have increased during 2014, the number of acquisitions has declined further than the reported values in 2012. This is a reflection that the value of M&A is increasing.

The estimates of the value of the acquisitions and also the number and value of disposals abroad by UK companies during Q4 2014 and for 2014 as a whole have been suppressed in this bulletin in order to avoid the potential disclosure of companies involved in this type of M&A activity.

Other outward significant transactions, valued at £100 million, which took place in the UK by foreign companies during 2014:

QUARTER 1

  • Smith and Nephew Plc of the UK acquired Arthrocare Corp of the USA.

  • Pearson Plc of the UK acquired Grupo Multi of Brazil.

  • IMI Plc of the UK disposed of its Beverage Dispensing & Merchandising Division of the USA.

  • IMI Plc of the UK disposed of its Beverage Dispensing & Merchandising Division of Germany.

  • IMI Plc of the UK disposed of its Beverage Dispensing & Merchandising Division of China.

  • British United Provident Associated Ltd of the UK disposed of Cruz Bianca Salud SA of Chile.

  • Pace Plc of the UK acquired Aurora Networks Inc of the USA.


QUARTER 2

  • Rexam Plc of the UK disposed of Pharmaceutical Devices & Prescription. Retail Packing Divisions of France, Germany and the USA.

  • Montagu Private Equity LLP of the UK acquired Rexam Pharmaceutical Devices & Prescription Retail Packing Divisions of France, Germany and the USA.

  • RPC Group Plc of the UK acquired Ace Corporation Holdings Limited of China.

  • Savills Plc of the UK acquired Studley Inc of the USA.

  • QinetiQ Group Plc of the UK disposed of QinetiQ North America Inc of the USA.


QUARTER 3

Figure 7: Area analysis of acquisitions abroad by UK companies 2005-2014

Figure 7: Area analysis of acquisitions abroad by UK companies 2005-2014
Source: Office for National Statistics

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Between 2013 and 2014 outward M&A saw an increase in activity in both Europe and The Americas compared to 2013. However, this is still lower than the reported number for both continents in 2011 when Europe recorded 104 acquisitions and The Americas reported 113 acquisitions.

Additional Information

Data for the following domestic and cross border acquisitions and mergers may be included in the next M&A quarterly estimates for Q1 2015.

  • Qatar Investment Authority of Qatar acquired Songbird Estates Plc of the UK.

  • Standard Life Plc of the UK sold Standard Life Financial Inc of Canada.

  • TPG Capital LLP of the UK acquired Prezzo Plc of the UK.



How Our Statistics Compare with External Evidence

The ONS estimates for domestic and cross border mergers and acquisitions, during Q4 2014 and for 2014 as a whole, appear to be in line with the views of some external commentators.

Global merger, acquisitions and disposals activity is often driven by the availability of credit and company profits as well as a sense of confidence in the economic outlook. The majority of large M&A transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the 2008-09 economic downturn, M&A activity declines. On the other hand, the process of completing an M&A transaction takes time and often there may be a lag between improving economic conditions and any quarter-on-quarter increase in M&A activity.

During 2014 the downward trend of domestic M&A may be a result of UK political instability as UK businesses experienced uncertainties about the outcome of the Scottish referendum, held in September 2014, and the impending General Election due in May 2015.

The record decline of inward M&A activity during 2014 may be in part due to the continued fluctuation and low levels of foreign exchange rates. Low foreign exchange rates may act as a deterrent and therefore possibly constrain European companies from raising the equity capital needed to pursue M&A investment in the UK.     

In comparison, the increase of outward M&A activity during 2014 may be partially due to favourable foreign exchange rates which may have allowed UK companies to acquire foreign companies more cheaply. UK economic conditions have remained relatively stable throughout 2014 and this may have allowed companies to regain confidence in the M&A markets enabling them to pursue outward M&A that had previously been ’put on hold’.

The Bank of England Credit Conditions Survey - Q4 2014 reported a slight improvement in credit conditions for UK businesses in Q4. According to respondents, the spread charged on loans for large and medium-sized businesses were reported to have fallen. Despite improvements in credit conditions, net lending to businesses fell in Q4. This was mainly due to an increase in the use of non-bank sources of funding instead. For example, net equity issuance was at its highest level since 2010. However, improvement in credit conditions for small and medium-sized enterprises (SMEs) was less marked than for larger businesses in 2014. Reasons cited for this included lower access to bond and equity markets for SMEs and an improvement in profitability reducing the need for external funding or credit.

The Bank of England’s (BOE) December 2014 Agents Summary of Business Conditions explained that corporate credit conditions had improved with Banks’ interest in lending to smaller firms appeared to be increasing, suggesting some increase in lenders’ risk appetites. In sectors where access to finance had been very difficult, such as hospitality, there were some reports of companies once again being able to access bank credit.

The Office for Budget Responsibility’s Economic and fiscal outlook December 2014 stated that credit conditions and the financial system continue to normalise gradually. However, the concerns about global growth prospects have contributed to falls in commodity process and European equity prices in recent months.

Allen & Overy, an international legal practice, reported in its M&A index Q4 2014, that there has been little call for optimism since the financial crisis struck with the M&A market taking longer to recover its health than anyone expected. The report explained that the economic environment is perhaps not as settled at the end of 2014 as it was at the beginning of 2014, and that has been reflected in growing stock market volatility in recent weeks. There also appears to be growing worries about higher interest rates which could hurt investor and consumer confidence.

The OECD 2014 Investment Insights paper dated November 2014 also appears to support the downward trend of global and domestic M&A. Using data on M&A investment it stated that international and domestic M&A are both on track (based on data through Q3) to reach their lowest levels in a decade. Economic conditions that are holding back international investment in Europe would seem to be discouraging domestic investment as well.

Background notes

  1. Overview of Mergers and Acquisitions:

    The M&A estimates are analysed and produced to measure investment data for:

    Investment in the UK by UK companies (Domestic investment).

    Investment in the UK by foreign companies (Inward investment).

    Investment in foreign companies by UK companies (Outward investment).


    Within ONS, M&A data are essential for producing the National Accounts. The survey results form important components of the UK Balance of Payments and Financial Accounts and are vital in the measurement of the financial and non-financial business sector accounts. M&A data is used in the compilation of the estimates for Foreign Direct Investment and additionally used by other government departments when preparing ministerial briefings. For example, HM Treasury, the Department for Business, Innovation and Skills, UK Trade & Investment and HM Revenue and Customs. The M&A data estimates are also used by foreign embassies, economists and academics for research purposes and for periodic statistical comparisons.

  2. Your Views Matter

    We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. Please contact us via email: m&a@ons.gsi.gov.uk or telephone Michael Hardie on +44 (0) 1633 455923.

  3. Basic Quality Information

    The Quality and Methodology Information for Mergers and Acquisitions(M&A) surveys report describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

  4. Relevance to Users

    The degree to which the statistical outputs meet users’ needs.

    Within ONS, the mergers and acquisitions data are considered to be essential for producing the National Accounts. The survey results form important components of the UK Balance of Payments and Financial Accounts and are vital in the measurement of the financial and non-financial business sector accounts.

    The Cross-Borders Acquisitions and Mergers survey (M&A) data are used in the compilation of the estimates of Foreign Direct Investment (FDI). These data meet the needs of FDI by collecting data on all acquisitions which lead to a holding in excess of 10% of the issued share capital. These estimates then feed into the UK Balance of Payments and the 'Rest of the World' sector of the financial accounts in the National Accounts, for which there is an EU legal requirement. Individual transaction information is also used to estimate the counterpart in 'portfolio' investment flows for monthly Balance of Payments.

    The data collected are also used in updating business structures and country of ownership codes on the Inter-Departmental Business Register (IDBR). The IDBR is a comprehensive list of UK businesses that is used by government for statistical purposes.

    Elsewhere in Government, Examples of Departments Who Use the Data Include:

    • HM Treasury, Economic Analysis Division, where the data are used in preparing briefing and forecasting;

    • Department for Business, Innovation and Skills, where direct investment data are required for ministerial briefing, parliamentary questions and in formulating trade policy;

    • UK Trade & Investment, where the information is used for briefing on the extent to which the UK is successful in attracting inward investment;

    • HM Revenue and Customs, where the data are used to help in forecasting company taxation.

    Non-Government Users Include:

    • Private companies which are interested in analysing country and industry data for trends by foreign firms in the UK and by UK companies abroad and also for researching corporate finance activity and for the purpose of investment banking;

    • UK embassies in foreign countries, who are interested in information on specific countries and companies making acquisitions, and

    • Private sector economists, journalists and academics who are interested in information on particular industries and particular countries for research purposes and who use the data for periodic statistical comparisons.

    Feedback from users has indicated that the information received from the M&A survey has a high degree of relevance across the above user groups, meets the vast majority of user needs, and all information currently collected and published is used.

    Source of Data:

    The information collected is based on reports in the financial press, specialist magazines, company and financial websites supplemented by special surveys to businesses to determine the form, value and timing of each transaction.

    If the information is not yet in the public domain, such transactions may not be reflected in the analysis. Where full information has not yet been received on the details of the acquisition or disposal, the value of the transaction indicated in the public domain is used as an interim estimate.

    The data shown in this release relate solely to mergers and acquisitions undertaken by companies: acquisitions by individuals are not included.

    This publication contains data relating mergers, demergers, acquisitions and disposals. Figures relating to mergers are included within acquisitions and those relating to demergers are contained within disposals.

    ONS makes every effort to provide informative commentary on the data in this release. As part of the quality assurance process, individual businesses are contacted in an attempt to capture reasons for large period on period data movements. It can prove difficult to gather detailed reasons from some businesses to help inform the commentary. Frequently, reasons given for data movements refer to a ‘change in market conditions’ or a ‘restructure of the company’. Consequently, it’s not possible for all data movements to be fully explained.

    ONS are aware that a number of users make use of these data for modelling or forecasting purposes. In doing so, it is important that users make note of our revisions policy (see note 9 in the background notes) and that all time series are on a ‘current price’ basis, which means that the values are as they were at the time of measurement and not adjusted for inflation. Acquisitions and disposal activity can be affected by UK and global economic and political issues and therefore quarterly estimates can be volatile.

    One question often asked of the M&A release is ‘why is there a time delay between the announcement of M&A transactions in the press and the inclusion of these transactions within ONS M&A figures?’ The difference is that ONS figures record when a transactions legally completes as opposed to when the transaction has been announced in the press. The complexities surrounding the acquisitions/disposals taking place often incurs a time lag, which can vary between quarters.

  5. Significant Transactions

    Significant Transactions tables show the reported figures for a selection of significant transactions which occurred in the quarter, where ‘significance’ is defined as the absolute value of the deal.

    The figures shown are usually the ones available from the financial press or other sources in the public domain although occasionally, with the consent of the company, the value returned to ONS is used in the tables instead of the press reported figure. If the company’s consent cannot be obtained then the deal is excluded, however, the values are included in the aggregate tables. Occasionally, therefore, a large deal may be missing (suppressed) from the lists so it is best to regard these tables as an indication of the ranking of deals rather than a completely exhaustive listing.

    Press reported figures for M&A transactions often differ to some extent from those supplied by companies to ONS and it is the latter which are used in compiling statistical aggregates in tables 1-10. Included in the prices quoted in the tables of significant transactions is the total published price paid for the company excluding any assumed debt where known. Deferred payments are included in the reported price even if the payment is made in a different quarter.

  6. Types of Transactions Covered

    Mergers are acquisitions in which all or part of the payment is made in shares, such that the shareholders of the two companies become shareholders of a new, combined company group.

    Demergers are disposals where a company group divides into two or more separate companies, in such a way that the shareholders of the restructured companies remain the same, or retain the equivalent value shareholding in one of the newly independent companies. Demergers are included in the statistics within disposals.

    Acquisitions are transactions which involve one company purchasing the ordinary shares of a second company (‘target company’). A target company is usually of a smaller size than the company undertaking the purchase.

    Disposal is a term used to describe the action when a company or organisation sells or liquidates the ordinary shares of a second company (‘target company’).

    Cross-border acquisitions denote transactions where a company in one country acquires, either directly or indirectly, a controlling interest in a company in another country.

    Direct transactions are those where a company acquires a controlling interest in another company.

    Indirect transactions are those where a company uses an existing foreign subsidiary to acquire a controlling interest in a company resident in another country. The acquiring foreign intermediate company may be located in the same country in which the acquisition is being made or in a different country.

    Acquisitions within the UK by other UK companies denote mergers and acquisitions involving only UK registered companies.

    Where the acquired company was a subsidiary of another company the transaction is classified as a sale between company groups.

    The phrase ‘acquisitions in the UK by UK companies’ refer to deals where the ultimate ownership remains in the UK. This heading does not cover the total number or value of deals where a UK company is the acquirer. When a foreign company acquires a UK company through one of its existing UK subsidiaries or a UK registered special purpose vehicle that deal is shown as part of the data under ‘acquisitions in the UK by foreign companies’.

    Acquisition of independent companies

    The acquisition of an independent company means the purchase of a company in its entirety – the company itself and all of its subsidiaries.

    Acquisition of subsidiary companies

    The acquisition of a subsidiary company means the purchase of part of a company.

  7. Financing

    This statistical bulletin provides details of the application of funds to effect mergers and acquisitions and the proceeds raised from disinvestments and demergers.

    For indirect foreign transactions there is the added complication of considering the movements of funds either as capital injection or in the form of loans between parent companies and their foreign subsidiaries making the acquisition. Occasionally, the foreign subsidiary obtains the funds required partly or entirely outside the UK from sources such as:

    • Own resources

    • Borrowing from banks and other local sources

    • Share, bond and other capital or notes issued abroad

    Also, a transaction may be funded by more than one method.

  8. Definitions of Geographic Areas

    Table A: Definitions of geographic and economic areas

    Europe
    EU Austria Belgium Bulgaria Croatia
      Cyprus Czech Republic Denmark Estonia
      Finland France Germany Greece
      Hungary Irish Republic Italy Latvia
      Lithuania Luxembourg Malta Netherlands
      Poland Portugal Romania Slovakia
      Slovenia Spain Sweden  
     
    Other European Countries Albania Andorra Belarus Bosnia and Herzegovina
      Faroe Islands Gibraltar Iceland Liechtenstein
      Macedonia, the Former Yugoslav Republic of Moldova Montenegro Norway
      Russian Federation San Marino Serbia Switzerland
      Turkey Ukraine UK Offshore Islands (Guernsey, Jersey, other Channel Islands & Isle of Man) Vatican City State
    The Americas      
    Anguilla Antigua & Barbuda Argentina Aruba Bahamas
    Barbados Belize Bermuda Bolivia Bonaire, Sint Eustatius & Saba
    Brazil British Virgin Islands Canada Cayman Islands Chile
    Colombia Costa Rica Cuba Curacao Dominica
    Dominican Republic Ecuador El Salvador Falkland Islands Greenland
    Grenada Guatemala Guyana Haiti Honduras
    Jamaica Mexico Montserrat Nicaragua Panama
    Paraguay Peru St Kitts & Nevis Saint Lucia Sint Maarten
    St Vincent & the Grenadines Suriname Trinidad & Tobago Turks & Caicos Islands Uruguay
    US Virgin Islands USA Venezuela    
    Asia      
    Afghanistan Armenia Azerbaijan Bahrain Bangladesh
    Bhutan Brunei Darussalam Burma/Myanmar Cambodia China
    Georgia Hong Kong India Indonesia Iran
    Iraq Israel Japan Jordan Kazakhstan
    Kuwait Kyrgyzstan Laos Lebanon Macao
    Malaysia Maldives Mongolia Nepal North Korea
    Oman Pakistan Palestinian Territory Philippines Qatar
    Saudi Arabia Singapore South Korea Sri Lanka Syria
    Taiwan Tajikistan Thailand Timor - Leste Turkmenistan
    United Arab Emirates Uzbekistan Viet Nam Yemen  
    Australasia & Oceania    
    American Samoa Antarctica Australia Bouvet Island Christmas Island
    Cocos (Keeling) Islands Cook Islands French Polynesia French Southern & Antarctic Lands Fiji
    Guam Heard Island & Macdonald Islands Kiribati Marshall Islands Micronesia, Federated States of
    Nauru New Caledonia New Zealand Niue Norfolk Island
    Northern Mariana Islands Palau Papua New Guinea Pitcairn Samoa
    Solomon Islands South Georgia & South Sandwich Islands Tokelau Tonga Tuvalu
    US Minor Outlying Islands Vanuatu Wallis & Futuna    
    Africa      
    Algeria Angola Benin Botswana British Indian Ocean Territory
    Burkina Faso Burundi Cameroon Cape Verde Central African Republic
    Chad Comoros Congo Democratic Republic of the Congo (Zaire) Djibouti
    Egypt Equatorial Guinea Eritrea Ethiopia Gabon
    Gambia Ghana Guinea Guinea Bissau Ivory Coast (Cote d'Ivoire)
    Kenya Lesotho Liberia Libya Madagascar
    Malawi Mali Mauritania Mauritius Morocco
    Mozambique Namibia Niger Nigeria Rwanda
    Sao Tome & Principe Senegal Seychelles Sierra Leone Somalia
    South Africa South Sudan St Helena, Ascension & Tristan da Cunha Sudan Swaziland
    Tanzania Togo Tunisia Uganda Zambia
    Zimbabwe        

    Table source: Office for National Statistics

    Download table

  9. Revisions

    Data for Q1,Q2 and Q3 2014 has been revised in the light of new information, and so revisions to the data for Q1,Q2 and Q3 2014 have been published in this statistical bulletin. No further revisions to data prior to Q1 2014 have been made. Therefore time series data for all quarters of 2013 and any previous historic quarterly periods remain unchanged.

    Annual data tables for 2014 are produced in conjunction with the Q4 2014 data. Revisions to the 2014 quarterly and annual figures are recalculated at Q1 2015 only. No revisions to annual data prior to 2014 have been made. Therefore time series data for previous historic annual periods remains unchanged.

    Revisions to the aggregates used in M&A principally occur for the following reasons:

    • Completion of transactions:
      On announcement of a proposed transaction an expected completion date is usually given. The publicly reported values will be allocated to the quarter of expected completion. If the transaction is ultimately completed in an earlier or later quarter, the recorded values will be reallocated to the new quarter.

    • Publicly reported values:
      Publicly reported values are initially used to compile the aggregates. These can vary considerably from the values ultimately supplied by the respondents, frequently because the assumption of debt has been included in the publicly reported value. A nominal value is applied if no publicly reported value is available. The final values used to create the aggregates are those supplied by the respondent.

    • Non-completion of transactions:
      On announcement of a proposed transaction the publicly reported value of the transaction is recorded. If the transaction does not subsequently take place the recorded value will be deleted.

    • Non-share transactions:
      On announcement of a proposed transaction it may appear that there will be transactions in the share capital of the companies involved and the publicly reported values will be recorded. If subsequent information contradicts this the recorded values will be amended or deleted.

    • Control:
      On announcement of a proposed transaction it may appear that the transaction will give the purchasing company control of the purchased company, that is, a share ownership of greater than 50%. If subsequent information contradicts this the recorded values will be amended or deleted.

    • Revisions from respondents:
      Very occasionally respondents revise the values that they have previously supplied to ONS. The revised values are those used to create the aggregates.

    Analysing average revisions between provisional and final estimates can provide an indication of reliability in an initial statistic. Provisional statistics may be based on less information than is available for final statistics as they have been processed more quickly to meet the demand of customers. By looking at these average revisions it can help us determine whether revisions are being made consistently in one direction for example; if early estimates are consistently under or overestimating the later figures. A test is subsequently performed on these average revisions to determine if they are statistically different from zero. Revisions that are not statistically significant imply that an average revision might be non-zero simply through random effects.

    Table B: Average Revisions over the Previous Five Quarters

      First Published Value (Q3 2014) Number in Latest Revised Period (Q4 2014) Average Revision 
    Number of Outward Acquisitions  18.0 24.0 6.4
    Number of Outward Disposals  .. .. 5.2
    Number of Inward Acquisitions  19.0 23.0 7.0
    Number of Inward Disposals  7.0 9.0 0.8
    Number of Domestic Acquisitions  30.0 42.0 10.4

    Table source: Office for National Statistics

    Table notes:

    1. * Significant Revision
      .. Suppressed

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    Table C: Average Revisions over the Previous Five Quarters

    Values quoted in £ million
      First Published Value (Q3 2014) Value in Latest Revised Period Q4 2014) Average Revision Average without Regard to Sign
    Value of Outward Acquisitions                             6,265.0                           4,470.0 316.6 562.2
    Value of Outward Disposals  0.0 0.0 908.2 908.2
    Value of Inward Acquisitions 2,672.0 3,629.0 531.8 531.8
    Value of Inward Disposals  981.0 1,175.0 106.8 106.8
    Value of Domestic Acquisitions 2,872.0 3,152.0 401.6 401.6

    Table source: Office for National Statistics

    Table notes:

    1. .. Suppressed
      * Significant Revision

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  10. Response Rates

    Table D: Response rates

    Cross-Border Mergers and Acquisitions (CBAM) Outwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Quarter 3 2014 Quarter 4 2014
    Response Rate (%) 96 82
         
    Cross-Border Mergers and Acquisitions (CBAM) Inwards
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Quarter 3 2014 Quarter 4 2014
    Response Rate (%) 89 81
         
    Domestic Mergers and Acquisitions (DAM)
    Statistics of Sample Size – Latest Survey Conducted:
    Reference Period Quarter 3 2014 Quarter 4 2014
    Response Rate (%) 88 89

    Table source: Office for National Statistics

    Table notes:

    1. Previous quarter has been revised, latest quarter is provisional

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  11. Notes to Tables

    The deal identification threshold was increased at Q1 2010 to a value of £1.0 million from a previous value of £0.1 million. As a consequence there is a discontinuity in the value and number of deals reported from Q1 2010 onwards compared with previous periods.

    Symbols used in the tables are:

    .. Figure suppressed to avoid disclosure of information relating to individual enterprises.
    – Nil or less than half the final digit shown.

    The sum of constituent items in tables may not always agree exactly with the totals shown due to rounding.

  12. Disclosure

    It is sometimes necessary to suppress figures for certain items in order to avoid disclosing information about an individual business. Further information on why data are suppressed is available in the ONS Disclosure Control Policy (337 Kb Word document) .

  13. Office for National Statistics

    The Office for National Statistics (ONS) is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK government's single largest statistical producer. It compiles information about the UK's society and economy, and provides the evidence-base for policy and decision-making, the allocation of resources, and public accountability. The Director General of ONS reports directly to the National Statistician who is the Authority's Chief Executive and the Head of the Government Statistical Service.

    The UK Statistics Authority has reviewed this publication in their report: “Assessment of compliance with the Code of Practice for Official Statistics”: Statistics of International Transactions, which was published on 8 December 2011. This review recommended that the Mergers and Acquisitions estimates be designated as National Statistics, subject to ONS carrying out certain requirements. ONS met all of these requirements on 3 May 2013.

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs;

    • are well explained and readily accessible;

    • are produced according to sound methods, and

    • are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

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  15. The Government Statistical Service (GSS)

    The Government Statistical Service is a network of professional statisticians and their staff operating both within the Office for National Statistics and across more than 30 other government departments and agencies.

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  18. Special Events

    ONS has published commentary, analysis and policy on 'Special Events' which may affect statistical outputs. For full details visit the Special Events page on the ONS website.

  19. Release Policy

    All data in this release can be downloaded free of charge from the ONS website. Alternatively for low-cost tailored data call Online Services on +44 (0)845 601 3034 or email: info@ons.gsi.gov.uk

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  20. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name Phone Department Email
Michael Hardie +44 (0)1633 455923 Structural and International Statistics m&a@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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