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Scottish Power has become the latest company to be bought by an overseas rival, but Scottish businesses are active deal makers in their own right.

When utility Scottish Power plc agreed to an £11.6 billion takeover by rival Iberdrola in March, it became the latest company to transfer to Spanish ownership, following in the wake of BAA, Abbey and O2 in the past two years.

After fighting off a bid from German power supplier E.ON in 2005, it seemed that Glasgow-based Scottish Power would stay in UK ownership, but Iberdrola’s bid of 777p per share proved too tempting to resist and was overwhelmingly supported by shareholders.

While some may bemoan the loss of another major company to foreign hands, it nevertheless demonstrates the attractiveness of Scottish businesses to overseas rivals – this was by far the largest deal in the country in the first quarter of 2007.

However, most deals in Scotland are at the small to medium-sized level and intra-UK. For example, Merseyside-based soft drinks maker Nichols – which produces Vimto, amongst others – recently acquired Cariel Soft Drinks for an undisclosed sum.

Cariel, which is based in Dunblane, has an annual turnover of £1.7 million and distributes brands such as Sunland and Ben Shaws.

Meanwhile, Nichols itself admitted it is in talks over a potential takeover, with Glasgow-based Irn Bru maker AG Barr rumoured in the press to be leading the chase.

Elsewhere, oil and gas continues to be one of the most active sectors in Scotland, with numerous companies raising finance and completing deals already in 2007.

One of the more significant deals was Aberdeen-based Dana Petroleum plc’s acquisition of Devon Energy Corporation’s upstream petroleum business interests in Egypt in a £155 million deal in April. The deal reduces Dana’s reliance on the declining North Sea market.

This may not be Dana’s last deal in Egypt. The company’s chief executive, Tom Cross, was reported in newspaper The Herald as saying that it could spend as much again in the country to capitalise on its potential.

Other companies seeking to do deals in the coming months include media company SMG plc, which recently announced plans to float Virgin Radio in the coming months as it seeks to concentrate on its TV business.

In addition, while SMG has pulled its immediate plans to sell its outdoor advertising business Primesight – citing that it cannot get the price it wants – the comapny will re-marketed again at a later date. Nonetheless, SMG is still planning to sell its Pearl & Dean subsidiary.

But Scottish businesses are not only looking to grow by acquisition, others have raised funds for their next stage of development. For example, morning networking events organiser Bacon Eggs & Entrepreneurs (BEE) secured a five-figure sum from businesswoman Amanda Boyle in March.

Following the deal, Boyle, who recently exited shop-fitting and commercial interiors contractor Caledonia Contracts, becomes executive chair of BEE and takes a 50% stake in the business.

Economic growth

With companies across various sectors seeking to grow, it demonstrates the confidence businesses have in the economy and its prospects. “The Scottish economy is in fine fettle,” said Dr Andrew McLaughlin, Royal Bank of Scotland group chief economist. “Output growth fell slightly [in March], but new orders increased, leading to a rare increase in backlogs of work. This will likely encourage further job creation.

“Capacity constraints may also encourage Scottish companies to push for higher prices, as has been the case in the UK as a whole.”

Nevertheless, while Scotland’s economy is growing consistently, it is still one of the poorer performing regions in the UK. In the past 12 months, only Yorkshire & Humberside and the East Midlands recorded slower levels of growth in terms of output, according to RBS’ PMI Scotland Report for April. Although in the past three months, Scotland also performed better than the Northwest, East of England and the West Midlands.

This uptick is also reflected in falling unemployment levels; in the past three months, Scottish businesses recruited more than their counterparts in London as well as five other regions.

Nevertheless, increasing numbers of Scottish businesses are finding the going too tough and are calling in the administrators. According to business information provider Experian, in the first quarter of 2007 207 Scottish businesses failed – 6.7% up from both Q4 2006 and year on year.

Only two other regions – the Northwest of England and Northern Ireland – also recorded an increase in failures, indicating that Scottish businesses are finding trading conditions much tougher than most of the rest of the UK.

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