Monday, 22 February 2021 10:10

US companies spend nearly £2.5 billion on Scottish M&A deals

Cahal Dowds, Chairman of Deloitte’s corporate finance advisory business

US companies have spent over £2 billion on M&A deals involving Scottish businesses in the last two-and-a-half years, according to new analysis from Deloitte.

There were 49 deals in total across the period, with the manufacturing sector recording the highest level of activity (15 deals). Consumer business was another strong source of deal-making, seeing 11 deals, while the technology, media and telecommunications (TMT) sector recorded a further 10.

Combined, companies from these three sectors accounted for nearly three-quarters of inbound investment from the US (73.47%). There were 18 deals involving Scottish outbound M&A, with the transactions amounting to £453 million. Six of these were in manufacturing and another four were in business, infrastructure and professional services.

The research, Deloitte’s inaugural US/UK M&A Deal Monitor, comes shortly after the Scottish Government announced its plans to establish a manufacturing centre of excellence, part of a wider programme to promote science, technology, engineering and mathematics (STEM). Among the deals in this sector was the sale of cabling and network infrastructure solutions business, Brand-Rex, to US-based Leviton Manufacturing.

Meanwhile, Edinburgh’s TMT scene has also been the focus of much attention, with companies such as Skyscanner attracting investment. The travel search specialist struck a deal with US venture capital group Sequoia Capital which valued the business at £493 million in October 2013.

Cahal Dowds, Chairman of Deloitte’s corporate finance advisory business, commented: “This deal activity reveals some of the strongest drivers of growth in the Scottish economy. Historically, we’ve had a solid manufacturing and industrial base – and judging by the deals involving US companies that remains the case. But complementing these traditional industries are some of the new and exciting technology companies emerging as the unicorns and household names of tomorrow.

“Scotland also performed very strongly in the consumer business sector, demonstrating the diversity of its economy. In fact, if you combined US activity in the Midlands, North and Scotland they outperformed the London and South East in the past ten quarters in this area. This is significant as arguably the devolution story for the UK regions has further to go.”

Last year inbound M&A activity from US buyers into the whole of the UK reached £32.7 billion, while outbound M&A from the UK to the US was worth £25.6 billion. By volume, US acquirers completed 322 deals in the UK, while the UK concluded 176 deals in the US last year, but increasing deal activity in every quarter.

Looking back over the ten quarters to end of 2015, the greatest number of US inbound M&A deals have been done in London (262 deals), followed by the South East (146), with another 51 deals in the UK’s Northern Powerhouse. For UK acquirers heading to the US, California is most popular state, with 83 deals completed, followed by New York (61) and Texas (37). In terms of sectors, over 25% of M&A transactions were TMT deals.

Cahal Dowds added: “There is an exceptional appetite for deal-making across the Atlantic, coinciding with a slowdown in the emerging markets, a strong US dollar and sterling, and a similarity of business structures and styles. US and UK companies are holding record levels of cash balances, and with slow organic earnings growth, they are increasingly pursuing higher profits through M&A activity.

“What is striking is that although the US has done more deals, the UK was doing bigger deals for much of 2015; remarkable given US GDP is five times that of the UK’s. For the second and third quarters of 2015, UK M&A deals into the US were worth more than US deals into the UK.

“A good showing in the US and UK economies, the strength of their currencies, low interest rates and the availability of funding will ensure transatlantic M&A activity remains a busy hub in 2016.”

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