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East Anglia: Region sees sharp fall in merger and acquisition values

06:00 07 January 2013

The £4.6bn acquisition of retail chemist group Alliance Boots by US drugstore chain Walgreen Co helped boost the value of UK merger and acquisition transactions last year, despite a fall in the overall number of deals

The £4.6bn acquisition of retail chemist group Alliance Boots by US drugstore chain Walgreen Co helped boost the value of UK merger and acquisition transactions last year, despite a fall in the overall number of deals

2012 was the most active year for “mega” merger and acquisition deals since 2009, according to figures from information services company Experian.

The number of deals worth more than £1billion announced during 2012 increased from 34 in 2011 to 39 and were together worth a total of £128billion.

Most of these “mega deal” involved cross-border transactions, including the £5bn acquisition of NDS Group, the Middlesex-based pay TV software firm, by California-based Cisco Systems Inc and the £4.6bn investment in Nottingham-based retail chemist group Alliance Boots by US drugstore chain, Walgreen Co.

Across the UK, the overall number of mergers, acquisitions, flotations, rights issues and placements announced fell by 3%, from 4,683 transactions in 2011 to 4,543 in 2012.

This was led primarily by a decline in deal-making in the final quarter of the year, which saw volumes down by 11% compared with the same period in 2011.

Thanks to the number of “mega deals”,however, the total value of deals increased by 4.8%, from £231bn in 2011 to £242bn in 2012.

In the absence of “mega deals”, East Anglia followed the downward trend, with the number of deals falling from 243 in 2011 to 214 and the value of transactions dropping from £11.517m to £3.814m.

Despite the fall in volume overall, the UK is performing well compared to the rest of Europe which saw a 10.2% downturn in deal volume announced in 2012, accompanied by a 10.5% fall in their total value.

Meanwhile, the volume of transactions funded by bank debt increased by 11.6% year-on-year, from 277 in 2011 to 309 in 2012.

So-called mezzanine-funded deals (a hybrid of debt and equity) were also up, moving from seven in 2011 to 12 in 2012. However, funding through venture capital dropped from 651 in 2011 to 595 in 2012.

Experian says this is potentially due to slower growth rates which could impact on the level and speed of returns, making some opportunities appear less attractive to investors.

The most active sectors in the very large deals segment were Food and Beverage Manufacturing with 15.4% of transactions, including Diageo’s £1.3bn purchase of a stake in Indian drinks firm United Spirits and the completion of Chinese conglomerate Bright Food’s acquisition of iconic British brand Weetabix for £1.2bn.

The next most active sectors were Chemical Manufacturing (12.8% of deals) and Professional and Business Services (10.3%).

The UK market has held up well over the last year in a global context, says Expieran. There was a British element in 47.3% of all European transactions, up from 43.7% in 2011, and in terms of value the UK contributed almost 42% per cent of the European total for 2012.

Elsewhere, deals in the Asia-Pacific region were down by 15.2% in volume and 13.5% in value, while in the USA activity was down by just under 5%, and value by 6.4%.

Wendy Driver, business development manager at Experian UK&I, said: “Despite the challenges faced by the Eurozone crisis, the UK has proven to be one of the most attractive markets in what has been a subdued year for mergers and acquisitions globally.

“The quality of UK businesses and assets, as well as favourable interest rates, has been consistently attractive to overseas investors which is helping to keep mergers and acquisitions activity buoyant and may serve to boost confidence further.”

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