The UK market for mergers and acquisitions (M&A) has taken a beating in the first half of 2013, but the telecoms sector has shone a light in otherwise gloomy statistics.
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This was the finding of the latest report from Experian, which showed the number of M&A, alongside Equity Capital Market (ECM) transactions, in the UK fell by 17.3% this year when compared with the first six months of 2012 – down from 2,491 to 2,060.
Yet, while overall figures were down, the telecoms sector saw a huge rise in the value of deals done – up from £4.4bn in 2012 to £23.8bn in 2013. This positivity was reflected in Europe as a whole, with deal values up by 77% and the overall number done also increasing by 11.9%.
The biggest deal of someone buying into the UK market came with Liberty Global’s acquisition of Virgin Media, which closed in June for £15bn. Of the UK companies spreading their wings further afield, the biggest deal came with Vodafone’s purchase of German telecoms firm Kabel Deutschland for £6.6bn.
“Some sectors are further along the road to recovery than others and the strong activity we are witnessing in the telecoms and financial services sectors is encouraging,” said Wendy Driver, business development manager at Experian.
“[But] UK businesses still seem to be maintaining a watchful, wait and see, attitude towards M&A so far this year. Subject to the economic outlook continuing to improve, we would anticipate an increase in companies looking to grow by acquisition as we move into the second half of 2013.”
Matt Walker, principal analyst of networks for Ovum, said: “M&A is part of the natural growth and decline of the telecoms industry. There are always mergers, even during the relatively quiet quarters.”
However, he believed the strong North American market and weaker European outlook had encouraged companies to look at doing deals.
“The recent upswing is, most directly, due to North America. M&A has picked up there and [North American] merger deals are almost always fairly big,” he said.
“Markets overall are more stable than in recent past, and some stability around valuations is needed to facilitate M&A deals. [However], the health of telecom differs regionally, with North America and China much stronger than most other regions, and Europe especially weak.
“This sort of disparity can force some carriers to consider mergers, just as other more cash-rich rivals look for acquisition targets to gain scale.”