Foreign takeovers of UK firms hit four-year low in early 2024

British firms saw a sharp decrease in takeover deals by foreign companies in the last quarter, the Office for National Statistics (ONS) said.

The total value of inward merger deals, where overseas businesses buy British firms, declined 39% to £6.1 billion in the three months to March 31, the lowest figure since 2020.

Just 144 UK firms were snapped up by a foreign buyer, a decrease of 16% on the previous quarter.

Among the biggest inward acquisitions of the first quarter was the buyout of British oil and gas firm Neptune Energy by Italy’s Eni for £3.9 billion.

The sparse figures appear to be a hangover from 2023, which saw a collapse in M&A activity in the UK, following a period of steep rises in inflation and interest rate hikes by the Bank of England.

The data preceded a flurry of renewed interest in British firms from foreign suitors in recent months, with a number of high-profile approaches in May alone.

London-listed firms including Royal Mail and mining group Anglo American are being pursued, with the former subject to a £3.5 billion bid by Czech billionaire Daniel Kretinsky last week.

Meanwhile, Australian mining giant BHP is attempting to seal a £39 billion takeover of Anglo American.

Also in May, UK retail investment platform Hargreaves Lansdown said it had rejected a nearly £5 billion takeover approach from a group of overseas private equity firms.

James Wild, partner and head of M&A at consultant RSM, said: “UK M&A activity has been subdued this past 18 months but glimpses of an improving market are appearing as investor confidence makes a comeback.

“With the UK’s economic recovery on the right path, inflation set to fall back to 2% and interest rate cuts on the horizon, this will provide further certainty to the M&A market – which is crucial to getting deals done.

“Plus, with the announcement of the General Election coming sooner than expected, this may prompt some sellers and buyers to get deals over the line ahead of any potential tax changes.

“At the same time, having greater certainty over the next government earlier on in the year sets the stage for M&A activity to return to normal levels by the end of 2024.

“While appetite to sell is building and sellers’ price expectations are realigning to current market conditions, deals are still taking longer to complete.

“That said, after sitting on their hands for some time, the private equity market is starting to make its return. Pressure to deploy the build-up of cash will likely see sectors such as business services, technology and healthcare benefit the most.”

The drop in inward deals completed in the first quarter drove down the total M&A activity involving British firms, which ticked down 4% in the first quarter of this year.

UK companies were involved in 426 takeovers both inward and outward, compared to 444 in the three months to December 31, the ONS said on Tuesday.