17/07/2024
Uk mergers & acquisitions
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“The State of Mergers & Acquisitions in the UK: A 2024 Outlook”

Will the UK’s mergers and acquisitions market recover in 2024 after recent lows? The scene for UK Mergers & Acquisitions is changing as 2024 approaches. Deloitte UK’s forecast shows a complex picture: fewer global deals but higher values in some, especially big corporate ones. Key factors include changing interest rates, more consolidation, and the Energy Transition’s big role in the scene.

UK dealmaking trends show fewer deals but hopes for more activity and better pricing balance. This is in line with PwC’s view that dealmakers are being cautious but eager. As 2024 comes closer, it’s not clear if current strategies will overcome upcoming challenges to strengthen the M&A scene.

Overview of the UK M&A Market in 2024

The UK M&A market recently mirrored global trends, resulting in fewer deals. In 2023, UK deal volume was 18% lower than in 2022. It went from a high in 2021 to £83bn in 2023, seeing a big drop in total deal value. But there is hope for 2024, thanks to the economy steadying, with more stable interest rates and lower inflation.

Last year, the health sector saw more deals than in 2022, being the exception. Private equity was major, making up 42% of transactions by volume. 21% of CEOs worry about their company’s future path. Yet, 56% of executives see deals as key to staying current.

The TMT sector is still strong, driven by the need for better tech, like cloud services and GenAI. Private equity is keen on TMT and sectors like energy and healthcare. But, the cost of doing deals is high, requiring a strong plan for creating value. Loans are also getting pricier, with private credit playing a bigger role.

For success in 2024, companies need a good strategy and focus on creating value. The value of deals coming into the UK fell to £109 billion in 2023 from £191 billion in 2022. However, the number of deals stayed roughly the same. Take-private deals took up more of the market in 2023, showing a change in trends.

Latham & Watkins led major M&A deals in 2023, like Danaher buying Abcam for around $5.7 billion. These deals show how private M&A plays a crucial role in shaping the UK’s M&A scene.

Trends Impacting M&A Activity in 2024

The M&A activity landscape in 2024 is influenced by many factors. These include the need for businesses to change and adopt new technologies. The drive for cloud services and generative AI in the TMT sector is increasing. Thus, advanced tech is crucial to stay competitive.

Decarbonisation is also shaping M&A activities. It’s vital in transactions within the energy, utilities, and resources sectors. Companies aim to reshape their operations to be more sustainable. Interestingly, 56% of senior executives believe M&A is key to keeping up with these changes.

Even with a dip in deal volume, private equity remains important. It represents 42% of 2023’s deal volume and 55% of the value. There’s a move towards sustainable financing and more equity investments. Also, private credit is becoming more popular, showing a trend towards creative financing in tough economic times.

Healthcare is the only sector with more deals in 2023 than in 2022, showing its strength. In the UK, take-private deals were 53% of all 2023 deals by value, up from 46% in 2022. This shows a move towards privatisation, as companies look for flexibility and strategic changes due to market pressures.

In conclusion, the UK M&A market in 2024 is set to be vibrant. It will be defined by tech advancements, sustainability, and new financing strategies. Companies like ASDA are using M&A for fast transformation in this changing market.

Role of Private Equity in UK Mergers & Acquisitions

Private equity plays a key role in UK M&A, driving many deals by value and volume. In 2023, these firms showed more confidence in the market. They focused on Technology, Media, Telecommunications, energy, pharma, and healthcare. These areas benefit from private equity due to the push for digital and sustainable changes.

Private equity uk m&a influence

The UK’s accounting sector shows how private equity can transform an industry. With around 40,200 firms, mainly small businesses, there’s a big chance for mergers. Private equity has already caused many mergers, helping smaller firms grow. It also offers good pay and chances for career growth, attracting more professionals.

Technologies like AI, machine learning, and blockchain are making accounting more efficient. Private equity is ready to invest in these technologies to improve access to financial data. With an expected increase in European private equity, the UK’s accounting industry may see more M&A activities. This growth depends on sticking to ethical practices and core values.

Private equity looks set to grow even more in 2024. It uses different types of investments to evolve. These investments come from various sources, showing its wide support and impact. Private equity is crucial for the future of UK mergers and acquisitions. It suggests that 2024 could be a landmark year for private equity deals in many sectors.

Key Challenges for M&A in 2024

In 2024, the UK M&A market is facing tough challenges that will affect deals greatly. We’ve seen a big drop in the past years. Deal volume went down 18% in 2023 from 2022, and deal value sank to £83bn from £269bn in 2021. This shows how important it is to tackle the UK deal market’s obstacles when planning deals.

High inflation and interest rates are making things difficult for M&A. The financial setting is getting tighter, which means getting loans is tougher and more costly. Private credit is becoming key in making deals happen. On top of that, geopolitical issues and broken international supply chains are complicating things, adding to the challenges faced in 2024.

Lower spending by consumers and high debt in companies are also big obstacles. According to PwC’s 27th UK CEO Survey, one in five CEOs is worried about their company’s future in the next ten years. This high debt makes it hard for companies to have financial freedom, making them rethink their M&A strategies.

However, there is a bit of hope. The gap between what buyers and sellers expect is getting smaller. This change is creating opportunities for those who are ready. Fields like technology, media, and telecoms (TMT), and energy are seeing more deals. This is thanks to the urgent need for new technology and energy solutions.

For businesses that can navigate through these issues, M&A is a chance for major changes. With the right strategy, they can turn these challenges into chances for strength and growth in the uncertain UK M&A world of 2024.

Strategies for Successful M&A Transactions

For M&A success in 2024, firms should use transformative deal methods. This includes creative financing and big ideas for value creation.

Key strategies for successful M&As in the UK focus on enhancing company performance. They involve obtaining cutting-edge technologies. They also tap into economies of scale in specific industries.

Investing in new companies and merging to cut excess capacity prove vital. These steps help speed up how fast a product hits the market.

Some mixed-success strategies include merging companies in split markets. They aim to reduce price wars. They also focus on reshaping business standards and aims.

Buying businesses at low prices and using extra cash wisely are key tactics. So are vertical integration and tax reduction.

Successful M&A approaches create value through synergies and scales. They use flexible setups and perfect timing. Engaging experts and balancing goals are crucial.

The UK draws global investors with its strong finances, global access, favourable taxes, and innovation. Success in M&As also needs risk management, thorough integration, and compliance with regulations.

Sector Analysis: Leading Industries in M&A

The sectors of Technology, Media, and Telecom (TMT), energy, and healthcare were at the forefront of mergers and acquisitions in 2023. They showed their key role in the UK’s business world. With the economy getting better, big deals became more common in these sectors for UK M&A activities.

Leading sectors uk m&a

In the energy sector, 2023 saw two huge deals. Exxon planned to buy Pioneer for US$59.5 billion and Chevron aimed to buy Hess for US$53 billion. These deals highlight the sector’s essential part in shaping business transformations, often with a focus on sustainability. Businesses are increasingly adopting transformative changes. They aim at innovative solutions for energy shift demands and operational issues.

The pharma and healthcare sectors also saw strong M&A actions, driven by ongoing evolution and the urgent need for advancements in medical tech. As the demand for healthcare grows, these mergers and buys are vital. They help in driving innovation and keeping businesses going. Meanwhile, the TMT sector experienced a significant deal with Cisco’s planned purchase of Splunk for US$28 billion. This was the year’s biggest tech transaction. High involvement from Private Equity firms shows the TMT sector’s appeal.

Additionally, over half of the senior executives believe deals are the best strategy for staying current with market trends, per PwC’s research. With continuous changes, especially in TMT, energy, healthcare, and pharma, these leading sectors are set to keep stimulating major mergers and acquisitions in the near future.

Key Factors Influencing Deal Volume and Value

Several deal volume influencers will shape the UK’s mergers and acquisitions in 2024. In 2023, deal volume in the UK fell by 18% compared to 2022. This was nearly a third less than in 2021. These changes are due to economic, business, and financial factors.

The M&A value determinants saw a major fall in total deal value from £269 billion in 2021 to £83 billion in 2023. This decrease shows the effects of economic pressures. However, it also points to chances for recovery as conditions get better.

Private equity was key in 2023, making up 42% of deals by volume and 55% by value. This highlights its big role in the market. Sectors like TMT, energy, pharma, and healthcare were especially popular with PE firms.

Despite tough economic times, with high debt, low consumer spending, and geopolitical risks, 2024 looks more hopeful. With falling inflation and stable interest rates, deal volume influencers and M&A value determinants might lead to more M&A activities.

PwC’s 27th UK CEO Survey found that 21% of CEOs think their company won’t last another decade without changes. This shows a strong push for transformation. Over half of the senior executives see transactions as key to keeping up with the market.

Moreover, private credit is set to grow, helping finance deals despite higher capital costs. Inbound UK M&A deal value also fell, from £191 billion in 2022 to £109 billion in 2023. Yet, deal volume was stable, hinting at a recovery chance.

Increased shareholder activism and new rules have changed deal methods and strategies. This makes it easier to buy assets at better prices. As things get more stable, these elements should lead to bigger and more focused M&A actions in 2024.

Future Prospects for UK Mergers & Acquisitions

The outlook for UK M&A is bright for 2024 despite a drop in deals last year. This includes an 18% fall from 2022 and nearly one-third from 2021. Yet, the future seems hopeful, with a recovery expected, especially in key areas like energy, tech, and pharma.

Private equity played a huge part, making up 42% of all deals in number and 55% in amount in 2023. More than half of top executives see these transactions as key to staying ahead. They are focusing their investments on sectors like TMT, energy, pharma, and healthcare.

Different sectors are changing at various speeds. TMT, energy, and healthcare are quite active, unlike consumer markets. Getting financing in 2024 is expected to be harder and costlier, with private credit becoming more important in deals.

The gap in expectations between buyers and sellers is getting smaller. This is opening up chances for proactive companies. The start of 2024 saw European M&A deals’ value double from last year. Morgan Stanley predicts a 50% jump in global deal-making in 2024 compared to 2023.

Private equity firms began 2024 with a record 28,000 companies yet to be sold, worth over £3tn. In politics, Labour has promised a max corporation tax of 25%. It dropped its £28bn a year green spending pledge. Its new plan aims to boost Britain’s energy future, focusing on creating ‘Great British Energy’ and a National Wealth Fund.

Conclusion

As we move towards 2024, the UK’s M&A scene looks cautiously optimistic. The last few years have been tough, with economic and geopolitical ups and downs. Yet, the upcoming year offers hope. Dealmakers are ready to use their skills and knowledge to tackle the changed market.

The value of deals has grown a lot recently. For example, the top ten deals in 2021 were worth £3.3 billion each, a huge jump from £0.6 billion in 2020. Big deals, like AstraZeneca buying Alexion Pharmaceuticals, made up almost 65% of the UK’s M&A value in 2021. This shows the UK’s M&A sector is changing, focusing on big, transformative deals.

There was also a spike in selling off businesses to others, known as inward M&A disposals. Major deals, like Walmart selling Asda Group PLC, helped the market stabilise after the pandemic. In 2021, the top 25 deals made up over 75% of all M&A value. This return to pre-pandemic levels indicates a healthy market.

In 2024, dealmakers will have to be smart, focusing on rules, thorough checks, and smooth deal-making. They’ll need to understand laws like the UK Takeover Code and the National Security and Investment Act. Staying ahead in this shifting market means using every insight on mergers and acquisitions. A well-thought-out strategy is key to making the most of upcoming opportunities.

Written by
Scott Dylan
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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.

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