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American companies buying the best of Britain on the cheap

The Guardian logo The Guardian 24/09/2018 Phillip Inman

© Getty US firms are taking advantage of the cheap pound to snap up some of Britain’s most successful businesses at bargain prices, according to the latest mergers and acquisitions data.

The value of deals involving US companies buying UK businesses more than doubled to £79bn in 2017-18 from £36.8bn in the previous year.

The low value of sterling, which last week slumped to $1.30 in the wake of Theresa May’s post-Salzburg statement, has given American buying power a boost and allowed US firms to outbid rivals.

Music app Shazam, which was bought by Apple for £299m, was among the many fast-growing UK-based firms that accountancy firm Moore Stephens said were bought by US rivals or private equity firms.

Music app Shazam is one of many fast-growing UK-based companies to be snapped up by US rivals or private equity firms – in this case Apple. © Getty Images Music app Shazam is one of many fast-growing UK-based companies to be snapped up by US rivals or private equity firms – in this case Apple. But interest from EU companies in acquisitions in the UK has lessened, leading to a 5% fall in the value of deals in the last 12 months to £13.3bn from £14.1bn.

Figures for the current year are likely to show another rise in activity following the plan by Coca Cola to spend £3.9bn purchasing coffee business Costa Coffee from Whitbread and the announcement that US insurance broker Marsh & McLennan will buy UK insurance company Jardine Lloyd Thompson in a £4.3bn deal.

Coca Cola to spend £3.9bn purchasing UK coffee business Costa Coffee © Getty Coca Cola to spend £3.9bn purchasing UK coffee business Costa Coffee

Moore Stephens said US firms, unlike their European counterparts, had shrugged off Brexit concerns.

“This has been in part due to the devaluation of sterling since 2014, making British businesses comparatively cheaper than many of their foreign competitors,” it said.

“Brexit has also been perceived more negatively on the continent by politicians, business groups and the media than in the US, making European businesses more cautious about acquiring UK companies,” the accountancy firm added.

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Many analysts had expected US firms to cut back on foreign buyouts following tax reforms brought in by the Trump administration last year. New rules encourage firms to repatriate cash they hold overseas. They also offer incentives to buy and invest in domestic firms. Previously, cash held outside the US had been used to fund overseas mergers and acquisitions.

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Moore Stephens said the large number of US buyers eyeing UK firms revealed that American business bosses were on the hunt for innovative and well-run businesses.

It said: “The confidence that US investors have placed in the UK is indicative of the underlying strength of UK businesses and the openness of its economy.”

Other firms purchased last year include UK-based social business network Huddle, which was acquired by private equity firm Turn/River Capital for £284m, and trading and investment software company Fidessa, which was taken over by Temenos Group AG for £1.3bn.


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