It certainly seems that George and Ira Gershwin’s protagonists were keen to find reasons to call the whole thing off – "you like to-may-toe, I like to-mah-toe" being one of the reasons. But when it comes to M&A there may be differences between the UK and the US, but there is an undeniable special relationship.

Over the five years 2008 to 2012, US acquisitions of UK companies amounted to $151bn, according to Thomson Reuters.

Quite incredibly – given the relative GDPs of the two countries – UK companies made just under $140bn of US acquisitions in the same period. It is perhaps entirely fitting that the $124bn ‘housekeeping’ exercise between Verizon, America’s largest phone company and Vodafone, the UK’s largest mobile operator, has single-handedly put the global M&A market on track for its best year since the collapse of Lehman Brothers.

According to Mergermarket, the value of all deals announced in the first nine months of the year topped $1.57trn – up 4.6% on last year. Verizon-Vodafone aside, global M&A numbers have risen consistently quarter by quarter throughout 2013 and average deal sizes are at their highest level since 2008.

British Value

A recent research note by analysts at Société Générale (SG) supports the outlook for the UK-US relationship. It argues that the so-called sixth wave of M&A – inspired by the need for companies to go global – still has a long way to run. The idea that multinational companies need to drive growth by elbowing into emerging markets is by no means new, but the SG report argues that timing is everything and that UK assets are just as attractive, if not more so, than companies in riskier emerging markets – especially to US buyers.

The US economy already seems set fair for recovery. Earnings are bouncing back on both sides of the Atlantic. Free cashflow is rising quarter by quarter. But perhaps more crucially for the US-UK deal axis, British companies appear to be relatively cheap. The price-earnings multiple of the FTSE 100 index is currently at a discount of around three full percentage points to its 10-year moving average. And recent Deloitte research suggests that average bid premiums in the first half of 2013 actually dropped from around 24% to 18%.

Perhaps unsurprisingly, US commentators are more bullish than their UK counterparts, given the extent to which the US is now seen as ready to reassert its

claim as the world’s economic powerhouse. "At the height of the financial crisis there was a feeling among many commentators that emerging markets such as China would power the global economy," says Jon Hughes, head of EY’s UK & Ireland transaction advisory services practice. "But over the last 12 months the pendulum has swung back to the US and it is now clear that America will drive the global economy going forward."

And across the pond, Jack Maier, head of investment banking at Headwaters MB, an independent Denver-based mid-market corporate finance boutique, also sees the US economic recovery driving deal flow between the UK and US: "I have been in this business for 27 years and my sense is that the market is gearing up for a very vibrant 2014 and 2015. We’ve been through the whole process of balance sheet triage. Earnings are now far more predictable and that underpins valuations, which in turn encourages sellers back to the market." US companies made seven of the 10 largest transactions in the first nine months of the year.

However, despite the relative value in British assets, just one involved a British target – Liberty Global and its acquisition of Virgin Media.

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