New data has shown that the value of M&A deals involving UK companies fell to a seven-year low during the first half of 2023. The fall comes amid an overall drop in dealmaking worldwide, driven by factors including rising interest rates and declining private equity activity.
The value of M&A deals involving a UK company (either as buyer or seller) fell 51 per cent in the year to date to $111.8 billion (£87.98 billion) according to figures from financial data group Refinitiv. This is reported to be the lowest level for the first half of a year since 2016.
This has partly been attributed to a sharp decline in megadeals - those with an enterprise value of over $5 billion (£3.9 billion) - with just one megadeal in the first half of 2023 (EQT’s takeover of veterinary drugmaker Dechra Pharmaceuticals) compared to four during the first half of 2022.
Along with the drop in overall UK deal value, Refinitiv reported that the total volume of M&A deals involving a UK-based participant also fell sharply, declining 26 per cent during the first half of the year to their lowest level since the first half of 2020 – when the UK had just entered its first COVID-19 lockdown.
One of the major factors behind this has been a decrease in private equity activity during the first six months of the year. Stock exchange group LSEG reported that private equity activity fell by 68 per cent, making it the quietest first half of a year since 2018.
Refinitiv data has shown that this is reflective of a broader global trend, with total deal value down 38 per cent to $1.3 trillion (£1.02 trillion) in the first half the year – making this the slowest first half of a year for dealmaking since 2020. Overall, global activity by deal volume fell 11 per cent.
The major factor behind this has been the global rise in interest rates, which have made the cost of borrowing to finance acquisitions higher. This has made the leveraged transactions that are typically used by private equity buyers especially difficult.
Economic uncertainty has also led to falling valuations, causing a disconnect between how sellers and buyers value businesses and assets and making some reluctant to sell in the current economic environment.
Read about other factors influencing M&A in 2023.
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