By Cahal Dowds, Chairman, Deloitte Advisory Corporate Finance
Investment in US companies by Scotland-based businesses is at its highest for two years, according to analysis from Deloitte.
The business advisory firm’s latest US/UK M&A Deal Monitor, found there were six deals completed in H1 2017, higher than any other six-month period since the firm started tracking transactions between the two countries in H2 2015.
Among the most recent deals were Wood Group’s acquisition of CEC Controls Company for £45.49 million, William Grant & Sons’ purchase of Tuthilltown Spirits, and Aggreko buying TuCo Industrial Products.
There were also two deals involving US acquirers and Scottish companies in the first six months of 2017: TSG Consumer Partners bought a 23% stake in Brewdog for £213 million, while Philadelphia-based Axalta Coating Systems purchased Aberdeen’s Spencer Coatings.
Manufacturing has been the most active sector in Scotland, with a total of 10 deals – seven involving US acquirers and three from Scotland. The Technology, Media, and Telecommunications (TMT) market was second with eight transactions, while there were seven each in Business, Infrastructure, and Professional Services and Energy and Resources.
Cahal Dowds, partner and vice-chairman of Deloitte UK, said: “The very high costs associated with operating in London and the South East are driving many businesses out of the region. Dealmaking is beginning to reflect this pattern for regionalisation, with a very gradual increase in the share of deals done in Scotland, as well as the east of England and the Midlands. Manufacturers, in particular, are choosing to locate or add investment in Scotland and the West Midlands.”
The total value of M&A deals between the US and the UK increased from US $20.1 billion in the first half of 2016, to $36.6 billion this year.
The value of acquisitions from the UK into the US was $28.8 billion, nearly seven times the $4.2 billion reached in the first half of 2016. However, the value of US acquisitions into the UK halved from $15.9 billion to $7.7 billion in H1 2017.
Dowds added: “Despite momentum from continuing uncertainty, M&A between the US and the UK has remained robust at or close to an all-time high in volume terms and the transatlantic corridor is one of the world’s largest deal corridors by value. However, this year has seen a divergence in expectations emerging for the near to medium term on both sides of the Atlantic; confidence over M&A volumes is high in the US, but more guarded in the UK.
While UK M&A activity into the US is up, investment from US dealmakers here has fallen. Uncertainties over regulatory change, the tax environment and the terms of the UK’s exit from the European Union are factors likely to have impacted on US acquisitions in the UK.
“Overall, there are currently more buyers for fewer businesses. High valuations are being driven by this fierce competition for assets, combined with a belief that M&A is a primary strategy for growth, and no longer second best to organic growth.”