Covid-19 and Brexit see foreign M&A investment in UK low

13 July 2020 2 min. read

The value of overseas investment in UK firms has fallen through the floor at the start of 2020, following the impact of the Covid-19 pandemic. According to new research, the drop in value is 7% larger than M&A deals for UK firms experienced at the start of the 2008 recession.

A report from consulting firm Willis Towers Watson has found that M&A value has dropped in the first six months of 2020. While the impact of the Covid-19 pandemic on deal-making at the first half of 2020 was not unexpected, however, some regions are weathering the storm better than others.

Regionally, North America experienced both the sharpest fall in M&A performance and the lowest number of deals for a six-month period since 2009, while in contrast, Europe recorded three consecutive quarters of positive performance  for the first time in two years; completing more deals in the first half of 2020 than the same period in 2019. Focusing on the UK, however, it is clear that the specific pressures relating to the country prior to 2020 have left it more exposed than the mainland to the Covid-19 crisis. 

M&A Quarterly Analysis (Non-UK Acquirers buying UK firms)

While Europe managed a total of 80 deals in the first half of 2020, compared to 68 in 2019, the UK saw its lacklustre 12 at the start of 2019 scarcely improve, hitting 15. This is still something of an improvement, but even with lowered asking prices due to the current economic downturn, buyers seem reluctant to invest in British firms – especially with the end of the Brexit transition period rapidly approaching. 

This is further illustrated by the falling performance of UK M&A deals involving non-UK acquirers at present. Willis Towers Watson found that this has declined rapidly over the first half of 2020 – having been in the ascendancy at the end of 2019.

Foreign investment in the UK M&A scene is now at its lowest point since before the global financial crisis of 2008. In the first quarter of 2020, sentiment remained somewhat positive, coming off the back of a bumper end to 2019, however the second quarter saw a massive decline of more than 31%.