Foreign funds totalling £18bn poured into the UK economy during the second quarter of the year as overseas companies spent six times as much money on UK assets as UK companies spent on foreign assets, according to statistics published by the Office of National Statistics and analysed by Grant Thornton Corporate Finance.
The research revealed that during the second quarter of the year, the most significant UK M&A transactions were carried out by private equity houses, one example being Legal and General Ventures’ acquisition of South Lakeland Caravans. However, private equity houses and UK companies are increasingly looking to foreign shores to search for new investment propositions, with China and India attracting increasing interest.
Another noted trend is the growing polarisation between a handful of players carrying out mega deals and the bulk of investors carrying out mid-market deals. There were 48 acquisitions in the UK by foreign companies during the second quarter of the year (unchanged from Q1 06), worth £18bn (£24bn during Q1 06). This means that the value of foreign acquisitions in UK territory during the first half of 2006 (£42bn) is almost as much as the amounts invested during the whole of 2005 (£50bn). In contrast, UK companies were more cautious with regard to buying assets abroad. The value of acquisitions abroad by UK companies totalled just under £3bn in Q2 06 (compared to £7.4bn in Q1 06), while the number of such deals dropped by 22% between Q1 and Q2 06 (from 90 to 70).