Number of European mergers and acquisitions drops, but value rises

30 October 2017

The global merger and acquisition market has seen a fall in the number of deals completed, while the total value of deals has risen. While the slight fall in M&A density is balanced by increasing prices, geo-political forces and increasing national protectionism could see activity impacted in a more concerning way in the future.

Earlier in 2017, global M&A activity was predicted by business leaders to remain robust, despite deal intensity slowing from 2015's figures last year. Activity remained well above that of the years following the financial crisis – and the participants of the survey by Big Four firm EY were generally upbeat about the prospects of the global economy. 64% believed the economy was improving, 32% said that it is stable, while just 4% said that they saw it as declining. In April and October 2016, just 21% and 36% said conditions were improving, while 55% and 49% respectively said conditions were stable. The majority of companies were expecting to continue leveraging acquisitions in 2017. The number was down slightly from October 2016, when it stood at 57%, although up from April last year when geopolitical uncertainties saw expectations fall to 50%. Overall then, the results prompted experts to expect above average acquisition activitythroughout 2017.

Now, a rival analysis by fellow Big Four member KPMG has revealed the merger and acquisition activity of the first half of 2017. The latest “Deal Activity Update” report shows that the volume of sales on the global market in the first half of the year actually dropped compared to the first six months of 2016. During the first half of 2017, 8,553 transactions were announced – a decrease of 6.8% over the first six months of 2016 when 9,180 deals were closed. Compared with the second half of 2016, the decline is even greater –9,328 deals were closed in the last two quarters. Worldwide, the total value of transactions increased from €1,235 billion in the first half of 2016 to €1,405 billion in the first six months of this year. While this was the third highest cumulative deal value in the last six months, it was a far cry from the record, which was achieved in the second half of 2015 as closed deals hit €1,961 billion.

Global deal volume

While overall value increased for deals in the EU, comparatively, the number of deals also fell by 9.7% in the first half of 2017, declining to 3,448 transactions. According to Danny Bosker, partner of KPMG Corporate Finance, the mixed nature of these trends is the result of changes in market dynamics. On the one hand, new competitors emerging means that companies work harder to improve their results, leading to higher sales values. On the other hand, investors and companies have to spend a lot of capital, because in previous years few attractive takeover opportunities appeared. In other words,  companies must now target quality over quantity due to inflated deal prices.

Another trend which emerged from the study is an increase in cross-border deals. The share of acquisitions of companies in the EU by companies from outside the EU has increased to almost 25% this year. In 2009, it was only 17%. A majority of the acquiring parties come from the United States and Canada. They focus mainly on EU companies active in the manufacturing, technological and business sectors.

EU deal volume

In view of this rise of over-seas ownership, Bosker emphasised that protectionism would likely continue to gain influence in European countries, partly in light of spending sprees in the UK, following the steady decline of the British Pound. Predatory companies, particularly from Asian economies like China, are therefore currently seizing on the improved exchange rate on their end to buy up everything from real estate to football clubs. Bosker elaborated, "Across the European Union, a discussion is currently taking place regarding foreign acquisitions. The measures taken by governments to prevent such ‘unwanted’ acquisitions will therefore become more and more visible. As long as these protection structures are not yet in place, the interest of US and China companies will increase significantly for companies within the EU.”

Climate remains attractive

Despite the decline in the number of transactions, in Europe and worldwide, the study concludes that the merger and acquisition climate remains highly attractive for investors. The prognosis is the latest to anticipate a positive outlook for mergers and acquisitions worldwide. For example, recent studies by Grant Thornton suggested that the number of mergers and acquisitions in the digital, advertising & marketing and food sectors continue to increase, while an AT Kearney analysis showed that the chemical industry is also descending on a record year. Most analysts therefore agree that the slowing in M&A activity in the short-term is no immediate cause for concern.

What could, however, trouble this sunny forecast, is the development of broader political and economic issues. According to Bosker, "A number of developments in the world are gaining increasing influence on the global merger and acquisition market. The increased attention of countries to a more protectionist policy, such as the Brexit, the course of the new US President and the current independence question for Catalonia, will inevitably affect the global market.”


SQW Group purchases property-based regeneration consultancy

19 April 2019

UK consulting firm SQW Group has completed its first acquisition since it completed a management buyout in January 2019. BBP Regeneration joins the company having collaborated with SQW for more than 20 years.

Established in 1983, SQW Group now operates all over the world. Comprising SQW, Oxford Innovation, Oxford Innovation Services – one of the UK’s leading innovation centre operators – and Oxford Investment Opportunities Network, the organisation’s origins can be traced to Britain’s two ancient university cities: Oxford, through Oxford Trust founders, Martin and Audrey Wood, and Cambridge, through SQW’s work in producing The Cambridge Phenomenon.

The consultancy specialises in public policy, working with entities from the public, private and voluntary sectors to research, develop, implement and evaluate social and economic development interventions. It now employs over 250 people across regional offices in London, Oxford and Edinburgh, and provides business support to over 4,000 entrepreneurs and small businesses each year. At the start of 2019, SQW secured its independence in a management buyout, advised on by M&A experts from Liberty Corporate Finance and Penningtons Manches.

SQW Group purchases property-based regeneration consultancy

SQW has strengthened its position as a provider of services across the business spectrum with the acquisition of BBP Regeneration. Founded in 1994, the consulting firm specialises in land and property-based regeneration and growth schemes, and is a leading social and economic development consultancy. 

The two firms first worked together over 20 years ago, when SQW and BBP collaborated to develop the first Regional Economic Strategy for the South East. More recently, they developed an economic strategy for Thanet and are now working together in locations stretching from Cwmbran via Oxfordshire to London.

With the addition of BBP, SQW can now provide an integrated advisory service for organisations developing property schemes which deliver economic benefit to their local area. By joining SQW, meanwhile, BBP hopes to further enhance its ability to support clients in delivering property and place-making ambitions. 

Speaking about the deal, SQW CEO David Crichton-Miller commented, “The UK more than ever needs solutions to the challenges of places – of high streets under threat, of meeting housing delivery targets, and of both economically over-successful and economically challenged towns and cities – and the combination of SQW and BBP is uniquely suited to developing those solutions. [This deal] brings together critical and complementary services relating to places to serve our clients with leading edge and practical advice.”

Andy Smith, Director of BBP Regeneration, added, “SQW shares with BBP the same values of seeking to provide outstanding, practical, real world advice that helps get buildings built and places developed.  We greatly look forward to the opportunities that come from joining our two organisations together.”