COMPANIES from the United States have spent more than £2 billion on mergers and acquisitions in Scotland during the past two and a half years, with manufacturers their most popular target.
Consumer businesses and technology firms have also been in high demand, according to a study into deal activity between the US and the UK. Together, these three sectors accounted for nearly three-quarters of inbound US investment into Scotland.
The inaugural US/UK M&A Deal Monitor produced by accountancy firm Deloitte recorded 49 investments into Scotland during the ten quarters to the end of 2015. Of these, 15 were in manufacturing, 11 in consumer businesses and ten in technology, media and telecommunications.
During the same period, Scottish firms completed 18 mergers and acquisitions in the US worth a total of £453 million. Six of these were in manufacturing and four were in business, infrastructure and professional services.
Cahal Dowds, chair of Deloitte’s corporate finance arm, said the deal activity reveals some of the strongest drivers of growth in the Scottish economy.
“Historically, we’ve had a solid manufacturing and industrial base – and judging by the deals involving US companies that remains the case,” he said. “But complementing these traditional industries are some of the new and exciting technology companies emerging as the unicorns and household names of tomorrow.”
Deals in the manufacturing sector included the sale in December of Glenrothes-based Brand-Rex, a supplier of copper and fibre optic cables, to privately owned Leviton of New York for an undisclosed sum.
Meanwhile, Scotland’s technology sector has been attracting growing interest from abroad, led by big names such as Edinburgh-based Skyscanner. It struck a deal with US venture capital group Sequoia which valued the global travel search engine at some £500m in October 2013. That valuation has since risen to some £1.1bn, making it a sterling “unicorn”.
Last year, mergers and acquisitions from the US into the UK as a whole reached £32.7bn, while investment from the UK into the US was worth £25.6bn. By volume, US acquirers completed 322 deals in the UK, while the UK concluded 176 deals in the US.
Dowds noted that outbound activity from the UK increased in every quarter during 2015. In addition, the UK was also doing bigger deals for much of last year, with the value of UK deals outstripping those from the US in the second and third quarters.
With interest rates remaining low and funding available, Dowds predicts that transatlantic activity will remain a “busy hub”. “There is an exceptional appetite for deal-making across the Atlantic, coinciding with a slowdown in the emerging markets, a strong US dollar and sterling, and a similarity of business structures and styles,” he said.
“US and UK companies are holding record levels of cash balances, and with slow organic earnings growth, they are increasingly pursuing higher profits through M&A activity.
“What is striking is that although the US has done more deals, the UK was doing bigger deals for much of 2015; remarkable given US GDP is five times that of the UK.
“For the second and third quarters of 2015, UK M&A deals into the US were worth more than US deals into the UK.”
Data in the monitor is based on deal volumes and values in Thomson One Banker and Deloitte analysis. Deal value calculations are based on M&A deals for which value is disclosed – deal values are not disclosed for a significant proportion of M&A activity.