M&A market remains strong despite decline in activity

New figures published today by the Office of National Statistics have revealed a fall in deal values across inward and domestic deals in Q3, but a sharp increase in the value of outward M&A deals.

Outward M&A values climbed significantly to 32.8bn in Q3 from 8.2bn in Q2, boosted by an estimated £10bn ($13.3bn*) acquisition of Alexion Pharmaceuticals INC by AstraZeneca. Inward M&A values fell to 10.7bn in Q3 from 28.7bn in Q2; and domestic deal values were also down to 3.1bn in Q3 from 4.4bn in Q2.

In total, there were 136 completed deals in September 2021, down from 164 in June 2021 and well below the elevated levels of activity seen in Q1, with 292 deals completed in March 2021.

Kirsty Sandwell, partner and head of transactions at RSM said: ‘The level of M&A deal activity has been in a hot bubble over the past year, but is now gradually cooling down, moving from frantic to strong.

‘Globalisation has meant that buyers are using M&A for cross-border growth rather than domestic growth. In particular, the US private equity market is investing billions of dollars into the US mid-market, meaning it now has increased confidence to invest into the UK and Europe in much greater numbers than in the past. Companies looking to exit will want to ensure they are as attractive as possible to private equity funds and overseas businesses.

‘The effects of Brexit have been largely masked by Covid, but some businesses are beginning to look at the prospect of offshoring their operations to bypass the shortage of labour in the UK.

‘As we emerge from the pandemic, the strong M&A activity looks set to continue until normal levels of business distress return, as many zombie businesses have been propped up by Government support, which has now ended. The high amount of uninvested capital means the market will hopefully have a softer landing when the bubble eventually bursts, which may happen around mid-next year.’