UK M&A Market Activity Year End 2023

The annual M&A Review, compiled by Experian MarketIQ, was released last week detailing UK M&A activity for 2023.

As usual, we take a deeper look at the numbers and pick out the positive highlights that will help to navigate the M&A landscape for the coming months.

To compare year-on-year figures for deal volumes and values isn’t going to produce anything we don’t already know. Nearly all sectors felt the pinch in 2023 and witnessed a decline in activity in some form. 

Where we believe the figures get interesting is when we look back a little further, comparing pre & post pandemic. This provides a much broader view of how each sector has grown or contracted which can help when looking forward or making plans to sell at the right time. With these latest figures we can compare a full five year period, so let’s get started…

UK DEALS BY VOLUME - LAST 5 YEARS

If we first look at the % change between 2022 & 2023 it’s clear that deal volumes were down in every sector, most notably in Infocomms, Support Services, and Health.

Then, when we look at the comparison between pre-pandemic levels of 2019 and (a struggling) 2023 we see a different picture with several sectors performing better, other than Financial Services which has been hit hardest by interest rate and inflation rises.

2023 was a year plagued with multiple economic challenges, but still managed to out-perform 2019 in the majority of sectors.

UK DEALS BY VALUE - LAST 5 YEARS

We ran the same exercise looking at the total value of deals in each sector. Manufacturing and Wholesale & Retail were the only sectors that out-performed year-on-year (22-23).

The Construction sector saw the biggest drop off in terms of deal values (down 55%) after three years of steady growth.

Again, when we look back and compare 2023 to pre-pandemic levels of 2019 we see the majority of sectors welcoming huge leaps in transaction values.

The Health sector continues to perform well with the ongoing drive in health tech deals contributing to a 76% increase in spending since 2019.

Jill Turner, Research Manager at Experian said:

"Despite an overall decline in activity, there were pockets of growth in certain sectors – in energy, and in areas of tech such as AI – and the outlook for 2024 is cautiously optimistic.

M&A remains a strategic priority for businesses, private equity dry powder is still at historically high levels and there is a healthy pipeline of transactions that were postponed last year due to market volatility.

With the sense that the rise in inflation and interest rates may well have peaked, deal makers are increasingly able to take a longer-term view of the market and feel more comfortable in pushing forward with major investment decisions - raising hopes for an upturn in deal activity in the year to come."

CONCLUSIONS

With growth in Energy and AI Tech, plus deal values in Manufacturing and Wholesale & Retail up 18% and 73% respectively, there are reasons to welcome 2024 with an optimistic smile rather than a wince.

Private Equity deals accounted for 26% of deals in 2023 (1,645 transactions) meaning there are a number of viable, attractive exit strategy options available to business owners in addition to trade deals.

The figures above are illustrative and one or two high profile deals can skew the deal value numbers.  From our perspective, the lower mid-market with which we operate in has been largely unaffected in terms of the number of clients looking to sell and the number of acquisitive parties active in the market.

We're still busy and have managed to achieve excellent prices for our clients for a number of years.

If you're considering whether now is the right time to sell or exit, we're on hand to give you advice and guidance.

All conversations are in complete confidence.