15/07/2024
M&a industry analysis uk
#image_title

“Conducting Industry Analysis for UK M&A”

What’s causing the UK’s mergers and acquisitions sector to slow down? Can strategic changes revive it?

Since 2021, the UK’s mergers and acquisitions (M&A) sector has seen a big drop. In 2023, there were 18% fewer deals than in 2022, and the numbers fell by almost a third from 2021. Only the health sector saw an increase in deals during 2023. The total value of deals in 2023 was just £83 billion, way down from £269 billion in 2021 and £149 billion in 2022.

Private Equity (PE) firms played a key role, making up 42% of all deals and 55% by value. The decrease in big deals, mainly those waiting for a more stable market, has slowed things down. Yet, 56% of top executives still think M&A is critical for keeping up with market trends.

Despite high inflation, interest rates, and global instability, the new year brought hope. With inflation dropping and interest rates becoming stable, there’s a new eagerness for deals. PwC’s Lucy Stapleton and Tim Allen speak about the need for mergers, like ASDA’s buyout of EG Group UK.

The Technology, Media, and Telecom (TMT) industry, along with energy and healthcare, are keeping deal numbers up. They’re driven by the urgent need to improve tech and support energy changes. Hugh Lloyd Ellis from PwC talks about the need for strong plans in deal-making. This helps justify prices and deal with the changing environment. Detailed analysis of the UK industry and understanding mergers & acquisitions are critical for navigating these challenges.

Introduction to Industry Analysis for M&A

Analyzing the M&A industry is crucial for successful mergers and acquisitions in the UK. It involves looking at a lot of data like past trends, the current state of deals, changes in the market, and tactics that work best for M&A. For instance, global deal values dropped by half over two years, falling to US$2.5tn in 2023 from US$5tn in 2021. Also, the number of global deals decreased by 17%, going from about 65,000 in 2021 to around 55,000 in 2023.

In the UK’s M&A world, many factors play into evaluating and planning deals. The number of mid-market deals in the UK fell sharply by 33% from 270 in 2022 to 180 in 2023. The total value of these deals also dropped from £14.4 billion in 2022 to £11.4 billion in 2023. Certain areas like retail, hospitality, and leisure saw fewer deals and lower values in 2023. However, the energy sector experienced three times more big deals compared to 2022.

Private equity plays a key role in the UK’s M&A space. In 2023, out of 182 deals, 38 involved private equity, indicating a rise in smaller, add-on purchases. The average deal size was about £34.5 million. Tech and telecom were ahead with 58 deals, followed by the hospitality, leisure, food, and drink industries with 41, and manufacturing with 28 deals. Despite challenges, some sectors like hospitality and leisure managed to see more deals and higher values in 2023 than in 2022.

Macroeconomic factors hugely affect M&A strategy and deal evaluation. Forward EBITDA multiples for major indexes went up by 15-20% in 2023. The S&P 500 and NASDAQ saw gains of 12% and 15% respectively towards the year end. The Nikkei 225 increased by 6% and the FTSE 100 by 5% in the same period. Yet, some struggling sellers managed to exit deals while still getting value in tough market conditions.

Interest rates are expected to stay high in 2024 but might gradually go down, impacting investor mood and deal-making. Since 1985, the UK has seen over 103,070 M&A transactions worth nearly 5,688 billion GBP. This highlights the M&A sector’s size and complexity, and shows why detailed industry analysis is essential for navigating it.

Trends in UK Mergers and Acquisitions

The UK M&A scene is changing in many ways. It reflects big shifts in deal numbers and market outlooks. There’s been a noticeable drop in UK deal-making. Deal volumes in 2023 are down by 18% from 2022 and nearly a third from 2021. This big decrease points to growing economic caution, affecting investor trust and financial health.

Deal values have also gone down, falling to £83bn in 2023. This is a drop from £269bn in 2021 and £149bn in 2022. Despite this, Private Equity continues to play a key role. It’s behind 42% of all deals by number and 55% by value in 2023. It shows its importance in business merging, especially in sectors like tech, media, and healthcare.

Industry leaders stress the need for big strategic changes. PwC’s 27th UK CEO Survey offers an eye-opening fact: 21% of CEOs think their companies won’t last a decade without change. This has pushed many bosses to see deals as crucial for staying competitive and keeping up with market shifts.

Future market views suggest geopolitical issues, like UK and US elections, complicate deal-making. Financing deals has become harder. There’s a move towards private credit as a key funding method. Such shifts make a strong approach to creating value, innovative financing, and thorough preparation for asset sales crucial for success in this changing environment.

Whilst the value of deals coming into the UK fell from £191 billion in 2022 to £109 billion in 2023, the number of deals stayed more or less constant. This shows ongoing interest in UK business mergers, despite the dip in value. Deal value from UK take-private transactions increased, making up about 53% of the total in 2023, up from 46% in 2022. This points to it being an appealing exit method for many businesses. Notable deals, like Abcam’s £5.7 billion buyout by Danaher Corporation, highlight the UK M&A market’s dynamic nature.

Key Sectors in UK’s M&A Landscape

The UK’s M&A scene is filled with different sectors, each playing a unique role. Financial services lead with deals worth £625 billion. This shows the strong dynamics of mergers and acquisitions in finance.

Sectoral m&a trends

The Energy & Power sector, along with Materials, significantly impacts the UK’s economy. Investments here focus on energy infrastructure and sustainability. It’s crucial for nation’s growth.

Consumer Products and Services also play a big part, with 9,700 deals. It shows the high demand and the need for companies to grow through mergers.

Tech firms make their mark with over 8,000 deals. This highlights the sector’s innovation. Meanwhile, healthcare is sixth in the UK’s M&A, showing its unique market position.

UK manufacturers are planning to expand through M&A. They aim for growth over the next two years. The cleantech sector also anticipates significant investments, highlighted by Baseimmune’s $14 million raise.

American private equity interest in UK companies has risen by 35%, with 181 deals in 2022/23. This shows the UK’s M&A attractiveness to international investors.

The start of 2024 saw an increase in major deals in the UK, hinting at a strong recovery. Experts predict a surge in M&A activities in London. The UK is considered the top European destination for M&A, according to the MAAIS.

Importance of Private Equity in UK M&A

Private equity has transformed the UK’s M&A scene. It accounts for 42% of all transactions by volume and 55% by value in 2023. This shows how key equity investment is in the UK’s M&A activities.

Even though the overall deal volume in the UK dropped by 18% from 2022, the health sector saw more deals. The total value of deals in 2023 fell to £83 billion from £269 billion in 2021 and £149 billion in 2022. Yet, private equity has kept the market lively, showing strength even with economic challenges.

Private equity firms have focused on sectors like technology, media, and healthcare. These areas got a lot of attention in 2023, due to their growth and innovation potential. Almost half of the deals in wealth management involved private equity, showing its significant market influence.

There’s been a rise in interest from North American private equity funds. This suggests the UK’s M&A market is becoming more attractive globally. Despite higher costs and slower growth, private equity is sparking leadership in M&A.

After the pandemic, getting financing has become harder and more costly. Yet, 56% of senior executives believe deals are vital for staying competitive. They see the gap between buyer and seller expectations getting smaller. With economic conditions expected to improve in 2024, aligning investor confidence with sector performance will be key.

M&A Industry Analysis UK: Fundamentals and Best Practices

To do well in strategic acquisition planning in the UK, it’s essential to understand the basics. You need to know how the market works and the best strategies to use. This means keeping an eye on trends and shifts that affect deals.

For those looking to learn more about M&A, there are courses available. One notable course splits over two half-days, from 9:30 am to 1:00 pm UK time. It covers how to create value and why it’s crucial in real-world scenarios. The course also explores various deal types like Buyouts and Spin-offs.

It’s vital to know how valuations for different companies vary. The course also covers the importance of different due diligence types. HR due diligence topics, including mergers and severance impacts, are also discussed.

The way the course is taught makes complex financial topics easier to understand. Learning through interaction helps in planning and preparing assets. Also, there are Early Bird offers that give up to 70% off, making it more inviting.

Knowing about funding options like Syndicated Loans is key to mastering UK deal-making. Being ready for the market is crucial, too. Being well-prepared is a major part of what’s considered best practice in industry analysis.

Impact of Macroeconomic Factors on UK M&A

Macroeconomic factors have changed how M&A happens in the UK, showing much unpredictability. In 2023, there was a major decrease in deals compared to the previous years. The number of deals dropped 18% from 2022 and even more from 2021.

Changes in interest rates, inflation, and consumer spending are key factors. These elements greatly affect investment decisions.

Private equity played a key role, affecting 42% of deals in volume and 55% in value. This shows private equity’s value in dealing with market changes. Sectors like technology, energy, healthcare, and pharma stayed as popular investment choices. This suggests some industries manage better in tough times.

Macroeconomic influences on m&a

Political issues and supply chain problems added to the M&A complexity. The total value of deals in 2023 was much lower than in previous years. Yet, 56% of business leaders still see M&A as crucial for quick transformation.

With the market in the UK being unstable, companies need to think long-term in their deal-making. Getting funds has become tougher, highlighting private credit’s growing importance. Deals are spread out unevenly across industries, so a focused strategy is essential for success.

Preparing for Industry Analysis

Getting ready for mergers and acquisitions requires careful preparation. This includes gathering past and current market data, looking ahead at trends, and understanding the effects of deals on specific sectors and the economy. Knowing about consumer behaviour, where investments are heading, and the financial state of target sectors helps a lot in M&A planning.

In 2023, the world of mergers and acquisitions showed the importance of being well-prepared. The number of deals in the UK went down by 18% from the previous year and dropped nearly a third from 2021. The deal’s total worth fell to £83bn in 2023, down from £269bn in 2021 and £149bn in 2022. These changes show why having a smart approach to M&A due diligence matters—for understanding the challenges and the potential rewards and risks.

For successful M&A work, focusing on key areas is crucial. With high inflation, rising interest rates, and costly capital, businesses face many economic hurdles. Supply chain issues add to the challenge. Having a strong plan that takes these problems into account is key to making good deals. Thinking of new ways to finance, create value, and get assets ready for sale can help seize opportunities and lower risks.

Numbers highlight why detailed preparation matters. For example, 21% of CEOs think their company might not last another decade without change. Yet, 56% of senior leaders see deals as the best way to keep up with market trends. Private equity plays a big part, making up 42% of 2023’s deal volume and 55% by value, especially in tech, energy, pharma, and healthcare. This shows the importance of focused investments in M&A.

Overall, getting ready for M&A means looking closely at the market, planning carefully, and being strategic. This helps businesses handle the ups and downs of mergers and acquisitions. It leads to growth and stability in a changing economy.

Effective Tools and Resources for M&A Research

In the field of mergers and acquisitions, accurate and strategic use of *M&A research tools* and *industry analysis resources* is crucial. The fall in global deal values from more than US$5tn in 2021 to US$2.5tn in 2023 highlights the need for detailed insights. It shows how vital comprehensive and data-driven information is.

Zephyr stands out as a versatile *M&A research tool*. It plays a key role for the Office for National Statistics (ONS) in monitoring transactions closely. These tools help analyse historical and current deals in depth. For example, global deal volumes dropped by 17% between 2021 and 2023, showing the importance of strategic analysis.

2023 saw varying deal volumes across different sectors. Sectors like aerospace, mining, and technology witnessed an uptick in deals. Meanwhile, others saw significant drops. Notably, big deals decreased by 60% since 2021, but the energy, utilities, and resources sectors saw a big increase in such deals. These trends underline the value of thorough industry analysis.

Using these tools and resources in M&A strategies is essential for success. An impressive 98% of CEOs plan to seek strategic transactions soon, a rise from 89% last year. They see opportunities in AI, biotech, and energy storage. This points out how crucial *industry analysis resources* are for a *data-driven M&A strategy*.

Sector-Specific Strategies for M&A in the UK

In 2023, the UK’s mergers and acquisitions (M&A) saw a big drop. Deal volume fell by 18% from 2022, and by nearly a third from 2021. The value of these deals decreased drastically to £83bn from £269bn in 2021. This shows how tough the market conditions were. Private equity (PE) firms remained key players, making up 42% of the deals by volume and 55% by value. They focused mostly on sectors like technology, media, telecom (TMT), energy, pharmaceuticals, and healthcare.

To succeed in sector-specific M&A, understanding each industry is key. Firms need to adjust their acquisition strategies to meet the trends and needs of different sectors. The spike in deals in the TMT sector highlights the rush for tech improvements. Companies in this sector aim to modernise and innovate to stay ahead. Focusing on acquisitions in the UK’s TMT sector can greatly improve a firm’s digital and tech skills.

The healthcare and energy sectors also need unique approaches. PE firms are carefully picking investments in these areas. They aim for sectors that offer steadier returns and growth. Also, when buyers and sellers have similar price expectations, it creates a chance for beneficial partnerships. These strategic alliances can lead to powerful synergies and stronger positions in the long run.

Adopting tailor-made strategies for each sector is very important. Firms should view deals as opportunities for big changes. They should also use imaginative ways of financing to overcome difficult and costly funding conditions. By focusing on specific sectors, companies can grow and lead in the ever-changing UK market.

Written by
Scott Dylan
Join the discussion

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scott Dylan

Scott Dylan

Scott Dylan

Scott Dylan is the Co-founder of Inc & Co, a seasoned entrepreneur, investor, and business strategist renowned for his adeptness in turning around struggling companies and driving sustainable growth.

As the Co-Founder of Inc & Co, Scott has been instrumental in the acquisition and revitalization of various businesses across multiple industries, from digital marketing to logistics and retail. With a robust background that includes a mix of creative pursuits and legal studies, Scott brings a unique blend of creativity and strategic rigor to his ventures. Beyond his professional endeavors, he is deeply committed to philanthropy, with a special focus on mental health initiatives and community welfare.

Scott's insights and experiences inform his writings, which aim to inspire and guide other entrepreneurs and business leaders. His blog serves as a platform for sharing his expert strategies, lessons learned, and the latest trends affecting the business world.

Newsletter

Make sure to subscribe to my newsletter and be the first to know about my news and tips.