Navigating landscape shifts: Q3 M&A Deal Indicators in the UK, Ireland & Europe

M&A activity in the UK and Ireland declined by 10% in Q3 2023, and by 17% YoY, indicating a stabilization after the post-COVID boom, while in Europe, M&A activity decreased by 23% quarterly and 24% YoY, attributed to factors like reduced risk appetite and higher financing costs.

By AnsaradaMon Dec 11 2023Mergers and acquisitions, Due diligence and dealmaking, Advisors, Industry news and trends

From booms to balance?

In the UK and Ireland, M&A activity kicking off in Q3 was down 10% QoQ, and down 17% YoY. The data indicates a period of stabilisation following the exceptional post-COVID years and the massive deals seen in 2021. M&A deal activity is gradually returning to more conventional growth patterns, as shown by the 2% increase in UK&I M&A activity over the past 12 months when compared to the 2020-2021 period.
The total value of deals also decreased, with a total amounting to $473 billion - a 17% decrease compared to the preceding quarter, according to data from GlobalData Thematic Intelligence. This follows the 7-year M&A value low in the first half of 2023 (Refinitiv). The most valuable transaction during the quarter was Permira's £703 million acquisition of Ergomed. M&A activity remained centred on AIM-listed companies in the UK during the period, with 7 out of the 10 firm offers announced targeting companies listed on the mid-market focused exchange.

Awaiting the resurgence: UK CEOs eye strategic transactions

Despite challenges posed by the economic environment, M&A activity continues to be a top priority for CEOs in the UK, especially in the context of technological innovation. According to EY’s recent CEO Outlook Pulse survey, an overwhelming 98% of UK CEOs express their intention to actively engage in strategic transactions in the upcoming year.
“Looking ahead, the fundamental deal drivers that supported the M&A market over the past few years remain intact and we expect private capital, which been resilient through many previous economic cycles, to lead the recovery followed by corporates,” said Silvia Rindone, UK&I Managing Partner, Strategy & Transactions at EY. “As the deals market picks up, we expect to see increasing interest in acquiring UK assets, particularly those in the life sciences and technology sectors, given the UK’s reputation in Europe as a leading destination for AI start-ups.”
As transformation becomes vital to stay competitive, more opportunities are expected to emerge into 2024.

European opportunities persist despite downward trend

In Europe, M&A activity commencing was down slightly further at a 23% quarterly decrease QoQ, and a 24% yearly decrease in transactions.
Despite ongoing opportunities in both buying and selling, the overall trend is expected to be downwards. According to a new study by CMS and MergerMarket, dealmakers are less optimistic about the prospects for European M&A in the next 12 months, with 35% expecting an increase in activity but 43% predicting a drop, including 11% who anticipate a significant decrease.
The first half of 2023 saw a decline of 47% in deal value compared to the same period the previous year. Factors contributing to this decline in sentiment include reduced risk appetite among buyers, higher financing costs due to high interest rates, cautious lending practices, and a growing number of bankruptcies in the market.
It’s important to note, however, that financial buyers including private equity dealmakers are more optimistic, with 46% anticipating a higher level of M&A activity over the next 12 months. This can be attributed to several factors, including their ability to select high-performing deals, their readiness to capitalise on lower valuations, and the presence of a significant amount of dry powder, which gives them considerable firepower to acquire businesses.

Q3 M&A Deal Indicators: UK, Ireland and Europe

Explore the Q3 M&A growth highlights and challenges across the UK, Ireland and Europe in our new regional Deal Indicators report.
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