Navigating UK M&A Trends 2023: Insights and Outlook

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Staying Informed: UK M&A Trends 2023

As the UK’s mergers and acquisitions (M&A) landscape evolves, staying updated on trends is crucial for informed decision-making. Let’s delve into Dealsuite’s M&A data & trend report, exploring what the UK’s M&A market holds for 2023.

Anticipated Transactions

In the UK’s M&A scene, a slight rise in buy and sell-side transactions is anticipated for 2023. The Covid-19 pandemic has led to economic shifts, urging businesses to adapt. Consequently, more companies might seek mergers or acquisitions to enhance operations and secure long-term viability.

Vibrant Assignments

Advisors’ reports indicate a surge in M&A assignments in the UK and Ireland, revealing continued market strength in the year’s initial half. Worth noting is that certain assignments could conclude in H2-2022 or face cancellations. Despite this, robust M&A activity seems poised to persist.

Industry Valuation Multiples

The average EBITDA multiple in the UK and Ireland dipped slightly to 5.40 in 2023. Intriguingly, this figure varied significantly across industries, ranging from 3.6 in Construction & Engineering to 8.4 in Healthcare & Pharmaceuticals. This underscores the role of industry in determining SME value within the M&A market, potentially influenced by economic conditions and consumer behaviours.

Cross-Border Endeavors

Cross-border M&A activity has gained traction in the UK and Ireland over five years, with a higher percentage involving international parties in SME transactions. This trend reflects the benefits of cross-border deals, including higher prices and better strategic alignment. Notably, the healthcare, pharmaceutical, and wholesale trade sectors boast higher EBITDA multiples compared to other Western European countries.

Inflation, Interest Rates, and Impact

Current inflation and interest rate hikes in the UK and Ireland can influence M&A dynamics. Advisors suggest inflation may lead to lower prices and reduced financing availability, while higher interest rates might decrease financing options and prices. However, not all impacts are negative, as some advisors reported no difference in business offerings despite these economic factors.

Sector-Specific Buyer Intent

Presently, the M&A market leans towards sellers, with demand surpassing supply. Demand varies by sector, with IT Services and Software Development and Construction & Engineering sectors topping the list. In contrast, Retail Trade and Hospitality and tourism exhibit lower demand. Overall, strong demand and limited supply can benefit sellers, albeit presenting challenges for prospective buyers.

Positive Outlook

Advisors express satisfaction with H1-2022’s UK & Ireland M&A mid-market performance and hold an optimistic view for H2-2022. Despite market uncertainties, the majority (69%) anticipate a strong or improved market in the near future. These indicators point to a continued active M&A landscape.

Staying Proactive

The evolving UK and Ireland M&A landscape requires businesses to stay updated on trends. Being proactive and collaborating with experienced advisors positions businesses for success amidst change. If seeking M&A guidance for buying or selling, contact us to navigate the process effectively. Contact Venture Corporate Finance today.

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