08 march 2022
New figures published today by the Office of National Statistics have revealed a fall in both inward and outward deal values and volume in Q4 2021, with a slight increase in the value of domestic deals.
Outward M&A values saw the biggest fall to 3.4bn in Q4 from 32bn in Q3, which is largely due the 29.8bn acquisition of Alexion Pharmaceuticals INC by AstraZeneca in Q3. The inward M&A values decreased to 10.9bn in Q4 from 12.4bn in Q3; while domestic deal values increased to 2.9bn in Q4 from 2.3bn in Q2.
In total, there were 77 completed deals in December 2021, down from 150 in September 2021 and the lowest level since the height of the pandemic in May 2020 where only 58 deals were completed.
Kirsty Sandwell, partner and head of transactions at RSM said: ‘The M&A market has been in a bubble over the past year, and these figures suggest the bubble has finally burst. The consistent run of high M&A activity is unlikely to be sustainable, and it looks like the industry is taking a much-needed pause for breath.
‘Ultimately, the deal environment needs certainty in order to flourish. The uncertainty surrounding the Russia/Ukraine conflict and the rise in oil and gas prices, presents headwinds for the deal environment which means M&A activity is unlikely to rebound quickly.
‘As witnessed after the Brexit referendum, buyers tend to halt deal activity until potential implications become more apparent, so it’s likely companies will take a similar approach in the coming months. There are many investors and advisers that have never lived or worked against a backdrop of inflation and rising interest rates, which adds to the macroeconomic uncertainty. This will naturally breed some caution as the community gets to grips with the new normal.
‘It’s likely tech M&A activity will be relatively unaffected during the current crisis and will drive overall M&A figures. With oil and gas prices on the rise, this may even lead to a focus on renewables and related infrastructure, meaning buyers could turn to domestic deals instead.