Belfast Telegraph

Sainsbury's swoop set the tone for year of dealmaking

Eye-catching deals involving a number of household names littered 2016, with some set to have major repercussions well into the future.

Sainsbury's started the year with a bang, announcing in January that it was seeking to snap up high street retailer Argos in a bid to better compete with the likes of Amazon.

The supermarket faced stiff competition from South African's Steinhoff, but eventually saw the deal home in April, shelling out £1.4 billion in the process.

The move surprised some observers, but Sainsbury's said the combination would create a ''world-leading'' retailer in food and non-food.

The supermarket has since announced plans to accelerate the roll-out of Argos stores within its supermarkets, with boss Mike Coupe saying that every outlet in the country will have either a concession or a click and collect point.

Steinhoff made a comeback to the dealmaking arena in September, snaffling budget retailer Poundland for £610 million.

The gambling sector also saw growing consolidation, with Coral and Ladbrokes inking a £2.3 billion merger.

But all three deals were eclipsed by the London Stock Exchange Group and Deutsche Borse's proposed £21 billion merger, which was announced just three months before the Brexit vote was to shock Britain to its core.

The deal, the duo's third attempt at a merger, faced first shareholder approval, which it duly received, but then came Brexit.

Rather than disintegrate under the weight of the referendum, the pair strengthened their resolve, arguing that the tie up made more sense following the vote to leave.

LSE said in July: "Whether the UK is just European or a member of the EU, the merger will create a globally competitive, industry-defining market infrastructure group at the service of European industry."

But regulators may yet take a different view.

LSE said last week that it had received a statement of objections from the European Commission over the merger, and the group is exploring the sale of LCH to the Euronext as it looks to see off anti-trust concerns.

The Brexit vote had a paralysing effect on dealmaking in general, with official d ata out on November showing that merger and acquisition activity nearly halved between July and September.

The Office for National Statistics (ONS) said there were 140 successful £1 million or more deals worth £34 billion in the third quarter, against 278 worth £33.1 billion in the previous three months.

The data provided the latest sign that firms are putting investment decisions on hold after the Brexit decision on June 23, with the Bank of England recently warning that corporate spending was being reined in amid uncertainty.

But the sharp falls in the pound since the Brexit vote is thought to be helping spur on demand for foreign takeovers of British firms.

Two post-Brexit deals involving private firms have seen Amplify Snack Brand in America gobble up British crisp firm Tyrells and Chinese giant Ctrip.com has also announced a £1.4 billion takeover of travel search website Skyscanner.

The biggest deal since the vote was Japanese firm Softbank's £24.3 billion takeover of British tech firm ARM.

ARM is widely regarded as the jewel in the crown of the UK technology sector, designing microchips for Apple iPhones, Samsung's Galaxy smartphones and Amazon's Kindle e-readers.

The deal, announced in July, was seized upon by the Government who described it as a "vote of confidence in Britain" following the referendum result.

As part of the tie-up, Japan's Softbank said it will embark on a major recruitment drive, doubling ARM's 1,600-strong UK workforce while keeping its headquarters in Cambridge.

Andrew Nicholson, head of M&A at KPMG, said: "It's perhaps evidence that those larger value deals that we've seen in the UK over recent months - such as the transactions involving ARM Holdings, Odeon Cinemas and Poundland - have likely benefited in part from a devalued pound, where a weakened British currency gave overseas investors a degree of leverage while making the overall cost of acquisition cheaper.

"We'll likely see more inbound activity in the short to medium term, particularly from foreign trade buyers who either want to gain a strategic foothold in the UK or strengthen existing ties."

Although announced in 2015, shareholders of beer giant SABMiller gave the green light in September to the firm's £79 billion takeover by Budweiser brewer Anheuser-Busch InBev, paving the way for the biggest deal in UK corporate history.

The record-breaking deal - dubbed "megabrew" - completed in October, creating a brewing giant with a raft of some of the world's biggest beer brands.

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