Navigating Uncertainty: The Robust UK M&A Market
The UK’s mergers and acquisitions (M&A) market has shown surprising resilience amidst nearly a decade of political and economic upheaval, including Brexit, the COVID-19 pandemic, and the Ukraine crisis. According to a recent report by Bayes Business School, despite these challenges, M&A activity has remained stable, though fragile.
Economic and Political Context: The UK has faced significant instability with high inflation, multiple prime ministers in a single year, and ongoing repercussions from leaving the EU. These factors have reshaped the M&A landscape, leading to fluctuating activity levels.
Market Resilience: In 2021, the M&A market experienced record-breaking activity due to the pandemic. Although there was a cooling in 2022 and a further decline in 2023, the market has remained resilient. This resilience is partly attributed to investors viewing uncertainty as a new norm and continuing to pursue deals, particularly mega deals in the first quarter of 2024.
US Influence: American private equity firms have increasingly invested in UK companies, attracted by the discounted valuations of British stocks. This trend saw a 35% increase in acquisitions by US firms in 2022/23.
Strategic Opportunities: Downturns are seen as opportunities for robust companies to acquire distressed assets at favorable prices. This period has seen deals involving top-tier companies or those nearing bankruptcy, with successful buyers conducting thorough due diligence.
Future Outlook: The M&A market resurgence hinges on stabilising monetary and political conditions, aligning buyer-seller valuation expectations, and restoring boardroom confidence. The UK remains a top M&A destination in Europe and ranks highly globally, according to the M&A Attractiveness Index.
The UK’s M&A market continues to navigate through uncertainty, showing resilience and adaptability. The future of this market will depend very highly on achieving greater economic and political stability and maintaining strategic investment approaches amidst ongoing global challenges.
