City firms are expecting an upturn in corporate merger and acquisition activity as the economic recovery encourages businesses to make use of accumulated ‘cash mountains’.
While the volume of acquisitions has this year been flat, firms are seeing higher-value deals. Accountancy giant EY reported that the value of UK M&A in the first half of 2014 hit £113bn and is at its highest level since 2008.
Meanwhile, a report by international firm White & Case suggests corporates in the US, who are sitting on record reserves of cash, may be ready to start spending.
Stephen Wilkinson, global head of M&A at Herbert Smith Freehills, said: ‘For a long time after the financial crisis, corporates have been giving money back to shareholders. They haven’t been using their growing cash reserves to fund transactions, but we’re now seeing a greater willingness to do deals than we have for some time.’
Richard Goold (pictured), corporate partner at Wragge Lawrence Graham & Co, noted that with company values being lower in Europe (relative to US values), US corporates are looking to M&A rather than organic growth to enter the European market.
‘Couple this with a strong heritage for intellectual property development in the UK and companies on this side of the pond have become a very attractive prospect for many US corporates,’ he said.
Rupert Weston, partner in the corporate team at Burges Salmon, predicted ‘significant’ M&A activity across a wide range of sectors including financial services, energy (especially renewables), healthcare, and TMT (technology, media and telecommunications).