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St Paul's Cathedral, London
Reuters/Toby Melville
A good time to make a deal.
M&A FRENZY

International buyers went on a record-smashing shopping spree of UK companies last year

By Eshe Nelson

The UK is “open for business.” This has been the British government’s catchphrase for years, and since the vote to leave the European Union, the prime minister has been shouting it louder. It seems the message has been heard, at least in one respect. Last year, foreign companies completed 227 mergers and acquisitions of UK companies, the most since 2011, according to the Office for National Statistics.

The shopping spree came to £187 billion ($227 billion), breaking records by a huge margin. The previous record was just £82 billion in 2007.

The value of 2016’s completed deals was more than five times that of the previous year. A few megadeals really tipped the balance, such as AB InBev’s £79 billion-takeover of SABMiller and Softbank’s £24 billion-purchase of ARM Holdings. But still, it’s a surprising jump given the unexpected outcome of the Brexit vote.

Instead of the shock and ensuing political uncertainty putting a brake on M&A, international buyers snapped up cheaper deals. The pound has fallen about 18% against the dollar since the June referendum.

According to City University London’s M&A research center, the UK was the third most attractive country in the world to do deals last year, after the US and Netherlands. Naaguesh Appadu from the center said there were three key reasons for the jump in UK deals last year: The pound’s decline made the deals cheaper. Lower interest rates around the world made it easier to raise capital to fund purchases. And meanwhile, private equity firms were sitting on record amounts of capital that they needed to spend.

If 2016 was the UK’s “year of the megadeals” it was mostly a one-way street. The number of UK companies acquiring overseas companies remained lower than during the financial crisis.