Cross-border deals accounted for almost one in four mergers and acquisitions in the Midlands during 2023, compared to almost one in three the previous year, according to research by business advisory firm Dow Schofield Watts (DSW).
DSW’s figures show that while the total number of deals involving Midlands companies fell by 9% last year to 513, the number of cross-border transactions declined much faster, falling by 27% to 119. As a result, cross-border deals accounted for 23% of all transactions in 2023, compared to 29% the previous year.
Almost two-thirds of international deals in 2023 were acquisitions by overseas companies and they proved slightly more resilient than overseas acquisitions by Midlands companies.
DSW was the founder of the international advisory network Pandea Global M&A, which helped to compile the figures. Harry Walker, a Partner in DSW’s Midlands corporate finance team, said: “The wider macroeconomic environment has had a significant impact on cross-border M&A activity as a whole, with declining market confidence throughout 2023.
“While Sterling’s weakness against the dollar may have had some impact on overseas acquisitions by Midlands companies, activity by overseas buyers has held up slightly better. Clearly the region remains a very attractive marketplace for them, in particular for those from the US.
“As yet the impact of the National Security and Investment Act, which was introduced in 2022 and allows the UK government to scrutinise and block foreign takeovers, isn’t clear in terms of deal volumes. However the novelty of this regime and its broad scope, covering around 17 sectors, has presented challenges on some deals throughout 2022 and 2023.
“While there are still headwinds in existence this year, with interest rates expected to fall, there should be an uplift in market confidence which will drive increased cross-border activity throughout 2024 as companies look to grow in the improved economic environment.”
In the UK as a whole, US companies were by far the most active foreign buyers in 2023 and responsible for over a third of all overseas acquisitions, followed by buyers from Sweden, Ireland, France, Germany and Netherlands. The US was also the most popular destination for UK companies acquiring overseas, followed by Ireland, Australia, Germany, Netherlands and Canada.
DSW’s figures, which were compiled using data from Mergermarket, show that technology, healthcare and ESG were key trends in cross-border deals during 2023.
Callum Sellar, a corporate finance specialist with DSW and a board member of Pandea Global M&A, added: “Technological disruption, the rise of artificial intelligence and climate change are all helping to shape the global deals market.
“The technology sector was the most active in terms of investment and completed deals and expected to produce the highest level of growth in the year ahead. Meanwhile in the healthcare sector, global trends in the wake of the pandemic and our evolving healthcare needs are driving investment.
“ESG is another trend worthy of note. The energy transition continues to drive business transformation in energy and utilities, and for businesses in general, ESG credentials are seen as increasingly important by potential buyers.
“Overall, global trends suggest 2024 will see an increase in M&A activity. There is clear pent-up demand from investors and with interest rates expected to stabilise, coupled with falling inflation, predictions for 2024 point towards a more positive outlook for the year ahead.”
Notable inbound acquisitions during 2023 included Thermo Fisher Scientific’s £2.3bn acquisition of Birmingham medical diagnostics manufacturer The Binding Site Group and that of Nottingham-based Pendragon Vehicle Management by US company Lithia Motors for £367m.
