# Navigating a buoyant M&A market: Does the deal corridor with the US or EU offer British companies the better scope for growth? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-06-02 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: UK's M&A Market Analysis: US vs. EU Deals Meta Description: Explore the latest trends in M&A activity involving British companies, with a focus on the US and EU corridors. Discover which offers better value amidst URL: https://financedigest.com/navigating-a-buoyant-ma-market-does-the-deal-corridor-with-the-us-or-eu-offer-british-companies-the-better-scope-for-growthhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/angus-grierson-1736842670208-compressed.jpg) The UK is at the centre of a buoyant global M&A market.In the first quarter of this year, M&A activity involving British companies surged to $275bn(£196bn) – its highest volume since 2000. In particular, the UK’s two most fruitful deal corridors – M&A with firms in the US and the EU – have had bumper years and in both cases, there are firm signs that this momentum is set to continue. Yet with Brexit imminent and the [uncertainty around the future of President Trump’s ‘America First’ economic](https://www.financedigest.com/why-a-liberated-cfo-and-fintech-solution-are-a-dream-partnership-for-navigating-economic-uncertainty.html "Why a liberated CFO and fintech solution are a dream partnership for navigating economic uncertainty") policies, both of these avenues also carry risks.In this article, Angus Grierson, Managing Director of LGB [Corporate Finance](https://www.financedigest.com/9-issues-in-corporate-finance-and-strategies-to-overcome-them.html "9 Issues in Corporate Finance and Strategies to Overcome Them"), examines which of the two M&A corridors will grow faster and offers better value for UK firms – and finds that while both offer opportunities, the US comes out just ahead in the short run. ![Angus Grierson](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/angus-grierson-450x338-1736842670197-compressed.jpg) Angus Grierson **_Tech sector leads the way in the UK-US deal corridor_** It has been a [recent golden period](https://www.financedigest.com/most-recent-development-report-on-centrifugal-chiller-market-to-witness-exponential-rise-in-revenue-share-during-the-forecast-period-2021-2031.html "Most Recent Development Report On Centrifugal Chiller Market To Witness Exponential Rise In Revenue Share During The Forecast Period (2021-2031)") for UK firms acquiring across the pond. There were 109 such deals in the second half of 2017 – nearly 25% more than the previous year, led by mega deals ramping up volumes such as [British American Tobacco’s $49.9bn](https://www.telegraph.co.uk/business/2017/05/31/reynolds-chief-exec-stay-bat-takeover/) acquisition of Reynolds American. The M&A [trends in the other direction are more mixed](https://www.financedigest.com/multigrain-bread-mix-market-size-share-top-leading-companies-consumption-drivers-trends-forces-analysis-revenue-challenges-and-global-forecast-2029.html "Multigrain Bread Mix Market: Size, Share, Top Leading Companies, Consumption, Drivers, Trends, Forces Analysis, Revenue, Challenges And Global Forecast 2029"), though still encouraging. On the one hand, the UK’s technology sector in particular is the most attractive for American buyers – and one of the chief reasons the deal corridor with US comes out ahead. Last year incoming US [tech investment](https://www.financedigest.com/italys-brembo-sets-up-venture-capital-arm-to-invest-in-tech-startups.html "Italy’s Brembo sets up venture capital arm to invest in tech startups") into the UK almost trebled to $22.8bn. Earlier this month, US private equity group Silver Lake agreed to buy ZPG, the [company behind property search websites Zoopla and PrimeLocation,and in the fintech](https://www.financedigest.com/7-cyber-threats-fintech-companies-should-watch-out-for.html "7 Cyber Threats FinTech Companies Should Watch Out For") and IT sectors over the last year, the UK received more funds from US investors than any other European country – highlighting increasingly marked interest in Britain’s technology sector, and international recognition of the growing importance of the world-class ecosystem of tech companies in the UK. M&A looks set to continue accelerating thanks to the hefty [corporate tax](https://www.financedigest.com/irish-corporate-tax-boom-breaks-more-records-in-november.html "Irish corporate tax boom breaks more records in November") cuts implemented by the US government in December. Corporate rates fell from 35% to 21%, companies are flush with cash waiting to be deployed to strike deals, combined with a huge amount of dry powder available – private equity managers today are sitting on a record [$963.3 billion](https://www.bloomberg.com/news/articles/2017-08-09/with-1-trillion-waiting-for-deals-investors-make-do-with-etfs)– the signs are positive for increased potential M&A activity. On the other hand, [investors are jittery about unpredictable US trade](https://www.financedigest.com/how-to-begin-investor-trading-in-australia.html "How to begin investor trading in Australia") policy stemming from President Trump’s ‘America First’ platform. US steel tariffs, for example, could be a factor, though it was recently announced that EU companies will be exempt. Another consideration is the [risks posed by rising interest rates](https://www.financedigest.com/ecb-must-be-prudent-with-rates-hikes-as-recession-risk-rises-panetta.html "ECB must be prudent with rates hikes as recession risk rises: Panetta"), as the Federal Reserve begins to unwind a decade of easy monetary policy.  There are also regulatory factors that might affect the US-UK M&A corridor, especially hardening [regulation in the tech](https://www.financedigest.com/uk-poised-to-ditch-plans-to-empower-tech-regulator-ft.html "UK poised to ditch plans to empower tech regulator – FT") sector. **[European M&A activity](https://www.financedigest.com/european-stocks-extend-record-rally-on-lift-from-insurers-ma-activity.html "European stocks extend record rally on lift from insurers, M&A activity") hits ten year high in spite of Brexit** [Brexit clearly](https://www.financedigest.com/post-brexit-insurance-reform-clear-before-december-says-boes-woods.html "Post-Brexit insurance reform clear before December, says BoE’s Woods") poses the biggest unknown with regards to the M&A corridor between the UK and the EU – but for now, at least, news remains largely encouraging. In fact, according to figures by the Office of National Statistics, the UK’s referendum vote triggered a substantial increase in spending from buyers overseas into UK companies, partly attributed to the sliding value of the pound. Inbound acquisitions have since slowed, [falling last year](https://www.financedigest.com/german-tax-revenues-fall-in-august-for-first-time-this-year.html "German tax revenues fall in August for first time this year"), though this was from a record high. But even so, the value of M&A deals between the UK and the rest of Europe more than doubled in the first [half of last year](https://www.financedigest.com/tods-sales-rise-17-in-first-half-of-year.html "Tod’s sales rise 17% in first half of year"), from $14.6bn to more than $32.4bn. This trend is continuing, likely as a result of British businesses looking to consolidate their position in EU [markets ahead](https://www.financedigest.com/dollar-soars-to-two-decade-high-as-putin-shakes-fx-market-ahead-of-fed.html "Dollar soars to two-decade high as Putin shakes FX market ahead of Fed") of a deal being finalised. As in the US, eurozone interest rates are also a key factor influencing the region’s growth – though [public pronouncements suggest that short term rates](https://www.financedigest.com/sp-global-fined-1-1-million-euros-for-premature-credit-rating-publications.html "S&P Global fined 1.1 million euros for premature credit rating publications") are set to remain at very low levels. European financing conditions are favourable, and this will drive deals over the [next twelve months](https://www.financedigest.com/prince-harry-and-meghan-to-visit-britain-next-month.html "Prince Harry and Meghan to visit Britain next month"). What’s more, M&A activity within the EU grew strongly last year, suggesting a vibrant [market that is largely resistant to political uncertainty not just in Britain](https://www.financedigest.com/britains-political-and-market-turmoil.html "Britain’s political and market turmoil"), but also elsewhere in the region. Overall deal value jumped 14% to $929bn, according to the [latest CMS European M&A Study](https://www.financedigest.com/why-is-demand-for-fertilizer-fillers-high-in-asia-pacific-region-check-latest-study.html "Why Is Demand For Fertilizer Fillers High In Asia Pacific Region : Check Latest Study") – and activity levels appear to have sustained their momentum into this year. However, much depends on the [nature](https://www.financedigest.com/bankers-bet-billions-on-new-wave-of-debt-for-nature-deals.html "Bankers bet billions on new wave of debt-for-nature deals") of the Brexit deal that is ultimately agreed – which is why there is probably more uncertainty over M&A prospects in this corridor than in the US deal corridor. The thorny issue of passporting rights – more than 8,000 financial services firms based in the EU or the European Economic Area rely on single [market passports to do business in the UK– weakens deal sentiment](https://www.financedigest.com/dollar-weakens-after-gains-all-week-debt-deal-hopes-boost-market-sentiment.html "Dollar weakens after gains all week; debt deal hopes boost market sentiment") until the future becomes less hazy and the mood of trepidation lifts over the city. **UK-US [deal corridor offers](https://www.financedigest.com/philip-morris-offers-eu-concessions-in-16-billion-swedish-match-deal.html "Philip Morris offers EU concessions in billion Swedish Match deal") the most promise** Whichever deal corridor does ultimately prove most active, it is clear that UK firms offer an attractive proposition for overseas investment thanks to its language, [business culture and fiscal governance](https://www.financedigest.com/uk-government-to-cap-energy-bills-for-businesses-bloomberg.html "UK government to cap energy bills for businesses – Bloomberg"). Though both deal corridors show much promise and a case can be made for either, it is UK-US M&A which appears likely to offer the best [prospects for growth](https://www.financedigest.com/specialty-printing-consumables-market-rising-adoption-of-advanced-technologies-to-bolster-markets-growth-prospects.html "Specialty Printing Consumables Market – Rising Adoption of Advanced Technologies to Bolster Market’s Growth Prospects"), at least until the uncertainty around Brexit is allayed. Last year broke all records for investment in the UK’s [technology sector](https://www.financedigest.com/why-trust-and-technology-are-the-perfect-partnership-to-rebuild-the-financial-sector.html "Why trust and technology are the perfect partnership to rebuild the financial sector"), with British companies – and London-based firms in particular – continuing to attract more funding than their counterparts in any other European city. The tech sector will continue to be one of the [key drivers](https://www.financedigest.com/packaging-and-textile-industries-key-driver-for-digital-printer-market-demand-2021.html "Packaging And Textile Industries : Key Driver For Digital Printer Market Demand 2021"), having by far outstripped the number of deals in any other sector over the past couple of years. Out of the enshrined innovation centres of California, New York and London in particular, we’ll continue to see pioneering [growth companies of tomorrow that drive technological demand](https://www.financedigest.com/computer-assisted-anesthesia-systems-market-industry-analysis-opportunities-technology-demand-top-players-and-growth-forecast-2027.html "Computer Assisted Anesthesia Systems Market Industry Analysis, Opportunities, Technology, Demand, Top Players and Growth Forecast 2027"), social change, business and globalisation. British acquisitions of US firms are hitting new highs, a [trend which shows renewed momentum so far this year](https://www.financedigest.com/the-year-ahead-top-payments-trends-to-watch-out-for-in-2022.html "The year ahead: Top payments trends to watch out for in 2022"). Meanwhile, though US buyers seem to have at least temporarily paused for breath, their additional cash reserves as corporate tax rates have fallen – alongside the trillion dollars of private equity funds that are still be deployed – suggest a very fruitful M&A pipeline over the [next year](https://www.financedigest.com/musk-says-tesla-will-launch-prototype-of-humanoid-robot-next-year.html "Musk says Tesla will launch prototype of humanoid robot next year"). --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---