Mergers: the practicalitiesPossible reasons for the reduction in the number of takeovers since the late 1980s
will be discussed later in this chapter when we are assessing the evidence on the suc-
cess of mergers.
The mean value of mergers was distinctly greater during the period 1995 to 2002
than it was in earlier or later years. There were many during that period that involved
some very large businesses (the major high street banks, for example). The resurgence
in the number of takeovers since 2002 may well be accounted for by the rise of private
equity funds.
Table 14.1 only relates to mergers where both bidder and target were UK busi-
nesses. There have also been quite a lot of international mergers involving UK busi-
nesses. Table 14.2 shows the total number of mergers involving UK businesses as
bidder or target over the ten-year period to 2007. The table makes clear that, although
there were many more UK/UK takeovers than there were takeovers in the other
two categories put together, the mean values of the international takeovers were sub-
stantially larger. It is, perhaps, surprising that the annual number of international
takeovers has not increased over the period, though it fluctuates from year to year.
Table 14.1Recent takeovers and mergers by industrial and commercial businesses
within the UK
Preference shares
Year Total number Mean value Cash Ordinary shares and loan notes
£m % % %1987 1,528 10.8 35 60 5
1988 1,499 15.2 70 22 8
1989 1,337 20.4 82 13 5
1990 779 10.7 77 18 5
1991 506 20.6 70 29 1
1992 432 13.8 63 36 1
1993 526 13.4 81 16 3
1994 674 12.3 64 34 2
1995 505 64.5 78 20 2
1996 584 52.6 64 35 1
1997 506 53.0 41 58 1
1998 635 46.5 53 45 2
1999 439 53.1 62 37 1
2000 587 182.1 37 62 1
2001 492 58.9 52 43 5
2002 430 58.7 69 27 4
2003 558 33.5 86 9 5
2004 741 42.4 63 33 4
2005 769 32.7 87 11 2
2006 779 36.6 * * 2
2007 825 31.9 75 19 6- These values are not available.
Source: Adapted from National Statistics (2008), Mergers and acquisitions involving UK companies 4th quarter
2007 Tables 8 and 9
Financing mergers in practice
Table 14.1 shows how recent UK mergers have been financed. Although the mix varies
from merger to merger and over time, it is clear that cash and ordinary shares of the
bidder business are very much more important than preference shares and loan notes.
In fact, taking the entire period into account, it can be seen that cash dominates.