Regent: UK tops European M&A charts

Despite a decline in deals, the UK is still a hotbed of activity, first-quarter study shows

The UK is top dog when it comes to acquisition despite a general slide in M&A activity across Europe.

Regent’s first-quarter 2012 analysis revealed that 2011 was a strong year for M&A, and seemed to indicate that economic concerns were being left behind.

But during the first quarter, deal activity was down 14 per cent compared with Q1 2011, and deals were down 22 per cent in the UK.

Although the number of UK deals fell, Regent said it was the most active in terms of "buy side" M&A deals. Despite the drop, large deals are still being announced, such as Cisco’s $5bn (£3bn) acquisition of NDS Group, Vista Equity’s $2bn acquisition of Misys and Hutchison’s acquisition of France Telecom’s Orange Austria business for $1.7bn.

The total value of deals announced dropped from $34bn in Q4 2011 to $27bn in Q1 2012.

There was a general reduction in deal activity, with the exception of the DACH countries (Germany, Austria and Switzerland), which have benefited from stronger economies. Surprisingly, Spain and Portugal also saw a lot of deals, despite their well-documented weaker economic position.

Deals involving buyers from the major European countries generally were found to have strong deal multiples, whereas peripheral European countries are at lower multiples, possibly due to distressed sales, Regent said.

Drilling into verticals, e-retailing businesses were one of the few exceptions to the decline in deal activity in Q1, with 45 deals in the quarter – a 36 per cent increase on Q4 2011.

Software business acquisition activity dropped by 20 per cent, but the biggest reduction in deal activity was in the communications sector, with hardware deals down 50 per cent and telecom services company deals down 53 per cent.

“Despite steady increases in share prices and technology indices during Q1 2012, there still appears to be underlying concern about the prospects for growth in the major economies and the need to remain cautious,” Regent’s report said. “Financial buyers, who had been consistently responsible for about 100 deals per quarter over the past two years, also cut back their activities by 13 per cent to 87 deals in Q1 2012.”