New figures have revealed that UK M&A value increased by two-thirds during the first half of the year compared to the same period in 2023, despite deal volume dropping by approximately a fifth.
During the first half of 2024, UK deal value totalled £68 billion, a 66 per cent increase from the £41 billion in H1 2023. This was also significantly higher than the 5 per cent increase in value seen globally during the first six months of the year, according to figures from PwC’s latest Global M&A Industry Trends report.
This significant increase in value came in spite of deal volume falling 20 per cent from 2,126 in H1 2023 to 1,703 in H1 2024. However, while this was a considerable drop, the H1 figure was roughly in line with activity in H2 2023 (1,681 deals) and the levels seen in 2019 prior to the COVID-19 pandemic.
The increase in deal value was driven to a notable degree by an uptick in high value transactions, with H1 2024 seeing 16 deals greater than £1 billion in value with a combined value of £42 billion, compared to seven deals with a total value of £17 billion in the same period last year.
Lucy Stapleton, Global Head of Deals at PwC UK, said: “The UK M&A activity in the first half of the year has mirrored the performance of the second half of last year, reflecting a cautious confidence in the current deals market.”
“Macroeconomic conditions continue to stabilise which make the conditions for deals more favourable, especially compared to where the market was at this point last year. So far, we have seen market activity dominated predominantly by corporates who have capital and are chasing growth.”
While there is considerable optimism that the recent election will provide stability that can help drive an increase in dealmaking and unleash pent-up M&A demand, Stapleton cautioned that valuations could still prove problematic, with sellers “holding out for prices they consider optimal, while buyers are waiting for greater certainty before committing to transactions.”
She continued: “Looking ahead to the second half of the year we expect confidence to continue growing in the market with elections now concluded, economic conditions continuing to improve and the prospect of a reduction in the Bank of England base rate creating favourable conditions for dealmakers.”
“Businesses will need to be agile to opportunities and shift their view of M&A from transactional to transformational to unlock growth and value potential in their organisations.”
The highest deal value during H1 2024 was in the Consumer Markets industry, which registered £20 billion worth of deals, close to a third of the total. This was followed by Financial Services (£19 billion) and Technology, Media and Telecoms (£11 billion).
Industrials and Services saw the highest deal volume, with 456 transactions, slightly more than a quarter of the total for the period, followed by Consumer Markets (383 deals) and TMT (376 deals).
Lucy Stapleton stated that deal volume in the Consumer and Industrials and Services sectors was being driven by the “need to respond to disruption, remain competitive and grow market presence”. She added that deals were also being driven by “Megatrends”, leading to strong deal flow in areas such as new technology software, energy transition and healthcare.
One notable feature of UK M&A that has been seen throughout 2024 is the relative sluggishness of private equity activity, which is expected to rebound as the economy stabilises over the coming months. PwC found that 37 per cent of deals during H1 2024 involved private equity, down slightly from 41 per cent in H1 2023. Private equity accounted for 46 per cent of deal value generated during the first half of the year, again down slightly from H1 2023 (52 per cent).
PwC UK Private Equity Leader Hugh Lloyd Ellis commented: “Relative stability is breathing life back into a deals market that has been suppressed for the last 18-24 months by macro-economic pressures and volatility.”
“The lack of activity has inevitably seen a number of portfolio companies reach (or even go past) desired levels of maturity and this is why we are now seeing private equity houses planning a large number of exits. They face a careful balancing act that requires them to navigate a valuation gap compounded by 2021 entry valuation levels, with the need to return capital to LPs to protect future fundraising aspirations.”
“This will create a market in which opportunistic buyers will capitalise, but they will need to heed the lessons of the last 24 months and a clear value story will be a prerequisite to acquisition.”
Early preparation will be crucial for UK business owners looking to capitalise on a rebound in M&A activity
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