14 December 2005, London – New research from leading independent corporate finance house, Close Brothers, shows that the UK manufacturing sector has been the biggest acquirer of domestic and overseas manufacturing assets in 2005.
In spite of the fact that the sector continues to come under significant pressure, the UK manufacturing industry is demonstrating a fight-back and showing its resilience through making 187 (2004:158) domestic and overseas acquisitions in 2005.
Close Brothers research shows that 91 (2004:88) of these were overseas acquisitions, representing £8.3 billion worth of outward investment. The US was the principal focus for UK companies, accounting for one-third of all overseas transactions (30) (2004:31). Germany was the second country of interest accounting for 20% of overseas acquisitions. The other 96 UK acquisitions were domestic, showing continued consolidation within the UK manufacturing sector.
|
Target country
|
Number 2005 vs 2004
|
Value (£million) 2005 vs 2004
|
|
|
2005
|
2004
|
2005
|
2004
|
|
US
|
30
|
33
|
3,462.8
|
1,618.0
|
|
Germany
|
18
|
9
|
2,311.9
|
221.0
|
|
France
|
8
|
6
|
367.7
|
267.0
|
|
Netherlands
|
6
|
4
|
556.5
|
49.0
|
|
Rest of World
|
29
|
14
|
1,549.3
|
961.0
|
* Table shows the breakdown of UK acquisitions of overseas assets in 2005. Source: Mergermarket
Examples of transactions in the sector include BAe Systems' acquisition of United Defence Industries for £2.2bn; and in the middle-market, Rexam's acquisition of Delta Plastics for £84m.
Commenting on the report findings, Andrew Cunningham, Director at Close Brothers, said:
'Despite reports of poor health in the sector, 2005 has been a very strong year of corporate activity for the UK manufacturing sector. This is the sector beefing up to create the economics of scale and the international footprint necessary to beat the pricing pressures currently affecting many businesses in the sector.'
In total, 155 (2004:194) UK manufacturing companies were bought in 2005. Of these deals 44 (2004:57) (28%) (2004:29.4%) involved a VC or VC-backed acquirer. The majority of acquisitions were made by their UK rivals, accounting for 96 (2004:113) transactions. This far exceeded the number of transactions carried out by US purchasers, which made 30 acquisitions of UK assets, including Ametek's acquisition of Solarton from Roxboro for £42m.
|
Acquirers
|
Number 2005 vs 2004
|
Value (£million) 2005 vs 2004
|
|
|
2005
|
2004
|
2005
|
2004
|
|
UK
|
96
|
113
|
3,530.0
|
5800.0
|
|
US
|
30
|
42
|
1,416.2
|
4200.0
|
|
France
|
5
|
3
|
4,427.5 (BPB bought for £4.4bn)
|
31.0
|
|
Ireland
|
4
|
4
|
36.3
|
92.0
|
|
Japan
|
4
|
1
|
2,944.0
|
30.0
|
|
Finland
|
3
|
3
|
11.7
|
128.0
|
|
Sweden
|
3
|
1
|
1,227.6
|
14.0
|
|
Switzerland
|
2
|
1
|
2,496.7
|
100.0
|
|
Rest of world
|
8
|
28
|
534.2
|
3,200.0
|
*Table shows breakdown of acquisitions of UK manufacturing companies in 2005.
Andrew Cunningham continues: "UK manufacturing companies remain sought-after assets due to the credibility of their strong, internationally recognised brands, and their high levels of technical ability and innovation. They also have significant customer bases which other companies want access to."
Close Brothers believes that manufacturing companies will need to focus on design and innovation to retain a competitive advantage in 2006. They will need to combat price pressures by continuing to source materials and labour from low-cost regions, and further sector consolidation is inevitable.
Close Brothers also predicts increased interest in European and UK assets from Asian corporates buoyed by a surge in their own financial strength and confidence gained through initial acquisitions completed in 2005.
Enquiries:
Justin Clark
Close Brothers Corporate Finance
+44 (0)20 7655 3784