M&A

The transatlantic partnership between the US and UK has long been heralded as one of the pinnacles of international relations – politicians often refer to it as the “special relationship”. And in neo-functionalist tradition, that’s brought about “spillover” into other areas; in this case, the world of business.

Analysing one of these spillover areas, we have launched our inaugural US/UK M&A Deal Monitor – an insight document which quantifies various aspects of the largest bilateral cross-border deal corridor in the world including, by deal values and volume.  

Our first set of findings make for interesting reading, underlining the strength and depth of trade across the Atlantic. 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.

Our analysis also showed that, over the 10 quarter period up to the end of 2015, US companies spent over £2 billion on M&A deals involving Scottish businesses. The main source of activity was manufacturing, which saw 15 transactions take place, closely followed by consumer business with 11 and technology media and telecommunications (TMT) registering a further 10.

Perhaps that first revelation is unsurprising. As many know, Scotland has a strong tradition in manufacturing and engineering, and our data confirms that its companies and skills in this sector are still sought after by foreign, particularly US, buyers. Among the deals struck for manufacturers was New York based Leviton’s  purchase of cabling and network infrastructure solutions business, Brand-Rex.  

We would hope to see recent initiatives buoy this resurgence. Among them, the Scottish Government has recently announced the launch of a manufacturing centre of excellence aimed at brokering collaboration between industry and academia, boosting competitiveness and improving productivity. If it’s successful in achieving all of this, more deals involving manufacturing companies could follow in the years ahead.

TMT is another standout sector from our research with a bright future ahead of it. Scotland’s companies, such as Skyscanner, have been the recipients of much attention over the past few years. During the period covered by our report, the travel search specialist struck a deal with US venture capital group Sequoia Capital, valuing the business at an impressive £493 million in October 2013 – a recent valuation places its value in excess of £1 billion, securing it’s “unicorn” status (a private business valued at £1bn).

There are more success stories to come. Five companies from Scotland’s TMT scene were recently identified as the next blessing of unicorns.Included among them were accountancy software provider FreeAgent, Oracle applications specialist Inoapps, and e-learning company Atlas Knowledge.

Finally, 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.

But it wasn’t all one way traffic; Scottish companies have been doing business in the US as well. Over the 10-quarter period, 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.

What this research reveals to us is the sectors driving 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 and consumer business companies emerging as the household names of tomorrow. Whatever the case, exciting times lie ahead in these sectors.

What do you think the future holds for trends in US/UK M&A? Tell us by getting in touch, leaving a comment in the box below or tweeting us on @DeloitteScot.

You may also be interested in:

The Deloitte US/UK M&A deal monitor
The Deloitte business health check – five measures to make sure your business is fighting fit
How Just Eat delivered to the Stock Exchange
New Stock Exchange programme could lead to more Scottish IPOs – if the price is right

Cahal

Cahal Dowds - Chairman, Deloitte Advisory Corporate Finance

Cahal is Vice Chairman of Deloitte UK and Chairman of the Advisory Corporate Finance business from 2014 (previously led the business from 2005). Cahal has advised on a significant number of large, complex transactions, in the UK and internationally. Cahal founded Rutherford Manson Dowds (RMD) in 1986, which went on to become the largest independent accountancy business in Scotland. RMD was acquired by Deloitte in 1999.

 

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