US And Asian Companies Ramp Up Their Interest In British Firms

US And Asian Companies Ramp Up Their Interest In British Firms

US and Asian companies are ramping up their interest in British firms as they look to capitalise on sterling's collapse following the EU referendum result.

Despite fears that Brexit uncertainty would choke off M&A activity, dealmakers have seen a growing appetite from American, Chinese and Japanese firms looking to buy British, as the pound struggles to recover from record lows.

Cavendish Corporate Finance said sterling's slide against the Japanese yen - coupled with the desire from Japanese firms to invest outside the country's stuttering economy - was driving interest in mid-sector UK firms.

Peter Gray, partner and head of financial services at Cavendish, told the Press Association: "Desperate to deploy capital outside the moribund Japanese economy, Japanese buyer interest has been seen across all sectors.

"The most eye-catching deal has been Japan's SoftBank Group's acquisition of ARM Holdings for 32 billion US dollars. However, while the ARM deal has grabbed the headlines, in the lower echelons of the mid-market, acquisitive Japanese companies are also making their presence felt.

"By way of example, the quoted Japanese BPO group, appropriately named Outsourcing Inc has recently acquired two UK businesses - JBW, a debt-enforcement business, and Allen Lane, a recruitment business."

Sterling has dropped more than 30% against the Japanese yen since last year, while the pound is down 12% against the US dollar and 11% lower against the Chinese yuan since the Brexit vote.

UK deals have struggled for momentum in the first half of 2016, with targeted M&A volumes hitting 73 billion US dollars (£55.5 billion) - its lowest level for five years.

However, a number of high-profile deals in recent months have brought fresh hope to dealmakers that UK M&A activity may prove resilient despite the uncertainty triggered by the Brexit vote.

Major deals include the Odeon & UCI cinema chain sale by Guy Hands' private equity vehicle Terra Firma to US firm AMC Entertainment for £921 million in July

It was quickly followed by SoftBank's £24 billion tie-up with ARM Holdings, marking the biggest investment from Asia into the UK.

Chinese investment group Yunyi Guokai (Shanghai) Sports Development is also on course to snap up West Brom football club.

Piers Prichard Jones, partner at Freshfields, said: "US and Chinese companies are certainly alive to opportunities in the UK post the vote.

"Any transactions are likely to have a robust strategic rationale but sterling's current weakness could be the catalyst for a US or Chinese acquirer choosing to move now rather than waiting.

He added: "A company with sterling denominated shares and significant non-sterling revenue is particularly attractive in this context, although many companies with this profile have seen their share prices rise recently."

Japanese firms were also swooping for UK companies in the run up to the EU referendum vote, with Yokogawa Electric Group snapping up KBC Advanced Technologies for 260 million US dollars (£197.8 million) and Nippon Koei Co buying Building Design Partnership for 143 million US dollars (£108.8 million).

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