M&A activity is picking up, but UK firms are more vulnerable to overseas buyers, writes TERRY MURDEN
Deal activity has stepped up in recent weeks, at least at the top end of the market, giving some encouragement to those corporate finance houses that have hung on to key staff in the hope that the long slump may at last be turning in their favour. With inflation coming down and expectations that interest rate cuts will follow, there have been some aggressive moves to unlock cash that is looking for a home.
For British companies, though, the traffic does seem to be heading towards them as overseas suitors queue up to buy what they see as attractive bargains.
That’s not to say they are getting their own way. BHP, the Australian multinational mining and metals company, has withdrawn from a bid for its British rival Anglo American in what would have created a commodities giant. Traders are now waiting to see if any of the other big players in the sector will take up the baton.
There is also some resistance to the Czech company EP Group’s £3.57bn bid for the 500-year-old Royal Mail. While both main political parties seem to be unwilling to let the tussle disturb their election campaigns, the takeover might not progress as smoothly as expected, despite the assurances on delivery, jobs and the location of the HQ given by EP owner Daniel Kretinsky.
The biggest deal in Scotland so far this year was the £1.3bn acquisition of Glasgow-based Smart Metering Systems by the US investment house Kohlberg Kravis Roberts.
That deal followed a move by another US finance house, Apollo Global Management, on Wood Group, the Aberdeen-based energy services company. Since Apollo walked away, another overseas company, the Dubai group Sidara, has been snapping away at Wood’s heels. Yesterday it tabled a fourth and final offer for the company, but traders seemed unimpressed by a price that was lower than the rejected Apollo proposal and the shares barely moved.
We have seen some movement in the wealth and asset management sectors. Earlier this year, Mattioli Woods, owner of Maven Capital Partners in Glasgow, agreed to a £432 million takeover by Tiger Bidco, an acquisition vehicle formed by private equity investor Pollen Street Capital. The departure of Abrdn CEO Stephen Bird has re-ignited speculation that it could become a target, possibly from Europe or Canada. Its shares have slumped alarmingly, leaving the company vulnerable in an asset management market that has been consolidating.
Among other international deals, Aberdeen’s Union Square shopping mall was sold by Hammerson to an affiliate of US private equity firm Lone Star. Whisky curator, The Artisanal Spirits Company, acquired the entire trade and assets of US-based bottling brand Single Cask Nation.
An all-UK offer that looks likely to proceed is Nationwide’s bid for Virgin Money. Nationwide chief executive Debbie Crosbie has revealed that the board looked at a number of other potential targets, including Metro Bank, but settled on her former employer.
Despite some disgruntlement from Nationwide members who demanded a vote, it looks like Ms Crosbie will take Virgin Money chief David Duffy’s scalp in what is also one of two rare deals involving building societies acquiring banks. Coventry is expected to acquire the Co-op bank which had also been in the sights of Ms Crosbie.
In the unquoted sector, French company Vinci Airports acquired a 50.01% stake in Edinburgh Airport at a price that was just shy of the SMS deal. ROVOP, an Aberdeen-based provider of remotely operated vehicles, was acquired by US offshore services conglomerate Edison Chouest.
At the lower end of the market there has been a flurry of mergers among law and accountancy firms, including this week’s tie-up involving legal firms Balfour+Manson and AH&Co. BTO Solicitors acquired Carruthers Gemmill, a family-based law firm which has specialised in advising lottery winners. Gilson Gray strengthened its position in Edinburgh with the acquisition of MHD Law.
The accountancy sector saw two deals last month with EQ acquiring Douglas Home & Co and JRW announcing a merger with Hogg & Thorburn.
The flow of deals in the sub-£50m range has undoubtedly been slower as potential buyers have held off during a period of high borrowing costs and uncertainty over valuations. The general election campaign is likely to cause a further delay to decision making. Analysts say a big majority for Labour on 4 July may inject some confidence by providing the stability the market desires.
What could help Scotland is a revival in IPOs. There has been a dearth of new issues which means the declining stock of quoted firms is not being replenished. In the last couple of years two firms cancelled their shares on AIM after struggling to make the market work in their favour and attempts to bring on new firms, which is said to be focused on the medtech and AI sectors, are proving a long burn.
Terry Murden was Scotland editor and Business Editor at The Sunday Times, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
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