James Moore: For most British firms, the talk’s about expansion not takeovers

 

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The Independent Online

Outlook It might seem strange to say it on the day Aviva and Friends Life confirmed their huge tie-up, but mergers and acquisitions involving this country’s companies are becoming a rarity, according to the Office for National Statistics. Its figures show that the number of takeovers between British businesses fell during the third quarter of this year to the lowest level since records began 45 years ago. The agency recorded just 30 involving firms worth £1m or more, down from 46 in the second quarter, itself hardly a big number.

Their total value was flattered a bit by the tie-up between Carphone Warehouse and Dixons Retail, which completed in August. But even after that, the £2.6bn total is nothing to write home about. Ah, I hear you say, it must be down to overseas outfits taking advantage of our open markets to gobble up our businesses. Well, no. Overseas bidders bought just 19 British companies during the three months in question. That matches a 25-year low set in the first three months of 2013.

A lack of credit was one (obvious) possible explanation doing the rounds, but the bond markets are open for business even if the banks aren’t. A lack of confidence caused by worries about the global economy? Perhaps, but while business investment slipped a little in the third quarter it has outstripped the growth in the economy.

The City, meanwhile, has been kept busy by a ready supply of flotations. Which is often what you do if you can’t find a trade buyer. London’s financial centre is, perhaps, one reason this country has tended to have a far higher run rate of deals than, say, Germany, whose economy has chugged along quite happily in their relative absence.

The siren call of the City’s corps of corporate financiers is something executives have, in the past, found hard to resist. And the lure of playing predator is a powerful one, despite most reliable studies demonstrating that deals tend to be value-destructive, at least for the bidders.

It’s a bit of a leap to suggest that Britain’s business leaders might have finally learned that lesson, given that people have been banging on about it for years. But for whatever reason, they do seem, at least for the moment, to be investing their money in expanding their businesses organically rather than on buying other businesses. Far from being a cause for concern, that might actually be something to celebrate.

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