M&A activity has increased in the UK during 2024, with improvements in economic and financing conditions helping to drive higher levels of dealmaking. This has also been seen in improved activity among corporate buyers and private equity firms, who are increasingly seeking to deploy the dry powder they have amassed over recent years on deals with attractive valuations.
A new study from Deutsche Numis has clearly demonstrated this major improvement in private equity confidence and showed significant optimism that deal activity will increase further still during 2025. Deutsche Numis polled 200 senior UK-based private equity professionals to provide an in-depth insight into market sentiment among major PE dealmakers, with the survey showing that the UK is seen as a favourable market for M&A activity.
81 per cent of professionals polled said that the UK was “more attractive” or “significantly more attractive” in comparison to other geographic areas, while 50 per cent said that regulatory dynamics played a role in making publicly-listed UK assets attractive.
According to Deutsche Numis, this latter statistic reflected the increasing familiarity and comfort that private equity firms have with the Takeover Code regime. This is further demonstrated by other findings from the report, which show growing interest in publicly-listed assets.
26 per cent of respondents said that they viewed UK public assets as their main pipeline focus in 2024, up from just 14 per cent in 2023. This interest is seemingly being boosted by growing confidence in completing public-to-private (P2P) transactions, with 65 per cent of those polled saying they had successfully completed a P2P transaction in 2024, up from 51 per cent in 2023.
Deutsche Numis suggest that there is a growing perception among PE firms that institutional owners at UK PLCs are receptive to take-private deals, amid equity outflows and a “very small number of unsuccessful P2P shareholder votes”.
61 per cent say that public assets are “fair” or “under-valued”, while the same number say that private assets are “over-valued” or “significantly over-valued". This comes with just 36 per cent of respondents saying that UK private assets were their main focus, down from 71 per cent in 2023 - providing further evidence of a concerted shift towards P2P deals.
PE firms were also increasingly exploring international deals. 38 per cent said that international targets were their main focus (with 24 per cent targeting international private assets and 14 per cent international listed assets), compared to just 15 per cent in 2023.
The survey also showed that competition for UK assets was increasing as deal appetite returned, with 80 per cent viewing private assets as “competitive” or “very competitive” and 69 per cent viewing public assets as “competitive” or “very competitive”.
Looking forward to 2025, 84 per cent of PE professionals polled by Deutsche Numis said that they expected to execute acquisitions in the high single digits or more. The poll revealed the possibility that the type of deals executed by PE portfolio companies will shift during 2025, with 20 per cent expecting “transformational” deals and 49 per cent expecting “sizeable bolt-ons", following a period in which smaller bolt-ons have been the most common deals.
Deutsche Numis’ co-head of UK M&A Oliver Ives commented: “We are seeing increased ambition from private equity going into 2025, with the majority expecting to execute on at least 5-10 deals next year. This is reinforced with respect to existing portfolio companies, where sponsors anticipate engaging in larger transactions after a period of primarily ‘housekeeping’ bolt-on deals.”
Despite ongoing competition, the survey also showed a reduction in sales of private assets that were perceived as being “very competitive”, dropping from 54 per cent in 2023 to 41 per cent during 2024. Deutsche Numis stated that they were seeing “more extensive pre-marketing with sellers aiming to engage with a smaller number of high conviction bidders to underpin processes.”
However, just 2 per cent of respondents said that they did not expect competition for private assets to increase over the next 12 months, while just 7 per cent said they did not expect increasing competition for public assets.
Domestic corporate buyers were seen as the biggest source of competition for public assets (cited by 45 per cent), followed by private capital (38 per cent) and international corporate buyers (10 per cent). Private capital was expected to provide the most competition for private assets (35 per cent), followed by international corporates (33 per cent) and domestic corporates (30 per cent).
In the 2023 edition of the survey, the financials sector was predicted to be among the most active in private markets – a forecast that has been borne out, according to Deutsche Numis, with the sector accounting for approximately 19 per cent of total transaction value in 2024 to date.
This is expected to continue during 2025, with respondents again ranking financials top for private acquisitions, followed by consumer and real estate. Financials was also tipped to be the most active for P2P transactions, followed by industrial and technology, media and telecoms (TMT).
Despite the overall optimism and strong M&A appetite among respondents, PE professionals still recognise significant headwinds to activity. Debt financing remained the top concern, but was only cited by 69 per cent of respondents in this year’s survey, compared to 83 per cent last year. 66 per cent described the UK debt market as “challenging” or “significantly challenging”, down from 73 per cent last year, while 84 per cent said they expected financing markets to improve over the next 12 months, up from 77 per cent in 2023.
Potentially reflecting concerns over a more interventionist approach from the Competition and Markets Authority (CMA), regulatory change was seen as the second biggest challenge to executing asset disposals, up from fifth in the 2023 survey. The political environment was seen as the third biggest challenge (second in 2023), followed by the economic outlook (third in 2023) and valuation gaps (fourth in 2023).
Finally, in the 2023 survey, 83 per cent of respondents predicted that the fundraising environment would not improve during 2024. According to Deutsche Numis this forecast has, again, proven correct – with 2024 run-rate figures broadly indicating “that the volume of successfully raised funds across Europe decreased by c.19%, albeit total capital raised was broadly flat year-on-year."
This year, 63 per cent predict that the fundraising environment will become “more challenging” or “significantly more challenging” in 2025 – representing a considerable improvement in sentiment compared to last year, while still indicative of serious concerns regarding fundraising. This was further demonstrated by the fact that 66 per cent of respondents said that the current fundraising environment was “more challenging” or “significantly more challenging” than last year.
Find out more about UK private equity dealmaking trends
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