UK M&A volumes down but appetite to invest up

06 June 2023
Today’s quarterly M&A statistics by the ONS reveal that mergers and acquisitions (M&A) in the UK in Q1 2023, which involved inward, outbound and domestic activity, was down on the previous quarter. But, RSM UK says appetite to invest is improving, largely due to economic recovery, albeit slow, and early signs of ‘realignment of expectations’ from sellers.

The total combined number of monthly cross-border and domestic M&A involving a change in majority share ownership averaged at 119 transactions during the three months of Q1; these compare with over 150 in each month throughout 2022.

The value of inward M&A (foreign companies acquiring UK companies) in Q1 2023 was £12.7 billion, £6.9 billion higher than the previous quarter, but £4.1 billion lower than Q1 2022. The total value of outward M&A (UK companies acquiring foreign companies) in Q1 2023 was £2.9 billion, £7.2 billion lower than in Q4 2022 and £0.2 billion lower than Q1 2022.

James Wild, partner and head of M&A at RSM UK, said: ‘Last year’s mini-Budget undoubtedly impacted on deal activity at the end of 2022, and into the first half of 2023. The lack of access to bank debt to fund transactions continues to present challenges. But we do expect an increase in transaction levels by Q3/Q4 of this year, and a return to pre-Covid levels by Q2 2024. 

‘Appetite to invest has not gone away. Indeed, it could be on the up. Economic recovery, although sticky, is on the horizon, and this combined with a realignment of expectations from sellers around asset valuations and uncertainty in the lead up to the next general election, all points to an impending uptick in activity.

‘Businesses considering PE backing can take comfort in knowing that attractive valuations are still in the market. Firms with high margins, recurring revenue or strong growth prospects are still able to draw in high levels of interest. PE investors still have significant capital to deploy and are ideally not slowing the cadence of their investment activity, especially when the right assets present themselves.’