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Will UK M&A recover?

The volume of announced deals involving UK targets in the first two quarters of the year fell 68.6% compared to the same period last year, leading to the quietest start to a calendar year for dealmaking since 2009.

At the start of 2Q20, 21% of deals announced in the first quarter were pending completion, account for 90% of the total £49.7bn spent in that period. However, a few sectors are expected to be among the first to see greener grass on the horizon:

Infallible infrastructure

Transactions in the sub-sectors of infrastructure, including in the utilities and telecoms spaces, will be a constant and valuations are expected to remain robust, commented one adviser.

Utilities

KKR’s £4.2bn all-equity acquisition of waste-to-energy recycling firm Viridor from Pennon and Blackstone’s £4.7bn buyout of iQ Student Accommodation were among the top-10 biggest transactions recorded in the six months to July.

Spanish infrastructure conglomerate Ferrovial is another corporate looking to ride the utilities wave by readying books for a break-up of its £3bn British subsidiary Amey. The Heathrow Airport shareholder is eyeing an early July launch of a process to sell its utilities and infrastructure business with advisers PwC.

Telecoms

Meanwhile, Vodafone was reported to be inviting advisory pitches for its anticipated £1.8bn flotation of its European towers unit. Large mobile network operators like Orange and Telefonica will continue to explore divestment of stakes or portfolio towers to avoid incurring the weight of capital-intensive investments amidst the 5G rollout in the UK.

TalkTalk has recently been subject of conversations about the potential for a take-private bid.

Technological toughness

Deal activity in the tech sector is expected to stay strong into 2H20. Recent transactions include the sale of UK-based automated software test tool operator Eggplant to Keysight Technologies and Checkout.com’s recent £121m fundraise valued the online payments provider at £4.7bn.

Private equity come-back

Private equity is expected to return to the UK M&A fray quickly given the vast sums of dry powder in hand. It is widely believed that a strong mid-market is among the biggest drivers of confidence for some of Europe’s biggest corporates. As an example, the amount of capital invested in mid-market deals in the technology sector globally is compared to pre-lockdown levels, commented one adviser.

Read the  full article here (subscription required).

by Ryan Gould and Charlie Taylor-Kroll in London, with analytics by Jonathan Klonowski


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