UK M&A expected to bounce back after falling to a 14-year low

Last week, it was reported by LSEG Deals that in 2023, the number of UK M&A deals fell to a 14-year low, resulting in a total value of 144.7bn, down 45% year on year – bringing its lowest year-to-date total since 2009. In light of this, Claire Trachet, M&A expert and CEO of business advisory, Trachet, states that though M&A in 2023 has performed poorly, indicators point to renewed optimism for dealmaking in 2024, as strategic buyers will take advantage of cheap valuations.

This year, M&As involving a UK target have only reached a value of £77bn, just over half the value recorded during the same period in 2022. This is in conjuncture with a 48% decline in domestic M&A, as well as a 49% drop in inbound deals. Yet economic indicators suggest that the UK will bounce back following its fall to a 14-year low. The CMA is set to approve the restructured $69bn Microsoft-Activision deal, the UK’s largest ever deal. This is positive news for the UK’s M&A sector which in recent times has been hamstrung by the CMA.

Research from DealRoom, reports that increased support into the M&A sector could quadruple its value to $4 trillion, meaning that the decision to block certain deals potentially stifles the UK’s progress and the creation of jobs across the sector. Therefore, the CMA’s decision to reverse its ruling on the Microsoft-Activision deal directly impacts and improves the attractiveness of the UK as an M&A destination.

As the UK enters the final quarter of the year, buyers and sellers alike have also now had time to adjust to the certainty that the UK will continue to have market factors of high inflation and interest rates. This will result in businesses being able to draft deals more comfortably knowing that the UK’s market dynamics are unlikely to drastically change. The UK’s high-interest rates and inflation have, therefore, forced many companies to complete recent fundraising tours and hold off on its deal-making. With a hopeful reduction in rates and inflation, this will allow these businesses to unleash their war chests of capital.

Claire Trachet (CEO/Founder) comments on the latest news surrounding the UK’s M&A sector

“Last week, it was reported that in 2023, the number of M&A deals made with the UK’s involvement fell to a 14-year low, resulting in a total value of 144.7bn, down 45% year on year. Whilst this is disappointing news for the sector, there is, however, now a growing number of investors who are sat on a dry powder pile having deterred investments in 2022. This means there are significant opportunities on the horizon at the end of H4 and the beginning of 2024, and now is the moment to prepare and get deals ready as optionality will increase in H2 of this year.

“These actions, coupled with the latest ruling from the CMA, who are set to approve the updated Microsoft-Activision merger having initially blocked the proposal, focus all eyes onto the UK. The approval of this deal with greatly impact and improve investor confidence in the UK, as well as help encourage companies in the future to look to draft deals in the UK. Its original decision to block the deal and its careful review of said restructured deal, demonstrates its commitment to preserve the UK’s competitive environment where multiple players, including growing talent, can thrive.

“The CMA’s open approach to considering a reshaped deal demonstrates its strength and the openness to recognising the realities of a globalised economy, as well as the UK’s desire to remain an attractive destination for all M&A activity.”