UK M&A down 16 per cent in 2022, but sentiment remains optimistic

New analysis from PwC has revealed that UK M&A activity declined 16 per cent last year compared to the extremely high levels of dealmaking seen during 2021 in the wake of the COVID-19 pandemic. PwC’s Global M&A Trends report showed 4,232 UK M&A deals last year, compared to 5,033 during 2021, and roughly in line with a 17 per cent decline in global deal volume.

The sharpest drop-off, however, was in deal value, which declined from a record £332.1 billion in 2021 to £144.9 billion last year, a fall of 56 per cent. The report also showed that deal volume and deal value both declined during 2022. In H1 2022, UK deal volume stood at 2,394 completed deals, a figure that fell to 1,838 during the second half of the year. Deal value, meanwhile, fell from £93.5 billion during the first half of the year, to just £51.4 billion during H2.

PwC UK’s Head of Deals, Lucy Stapleton, commented: “UK M&A activity in 2022 saw contrasting performance across the two halves of the year. In the first six months we saw some of the buoyancy of the second half of 2021 spill over, but as the year developed we saw the political situation exacerbate the volatility in the macroeconomic environment that led to surging inflation, rising interest rates and overall, lots of uncertainty in the market. That led to a rise in the cost of debt, a growing gap in valuations and in the second half in particular we saw the big ticket transactions calm down while the mid market held up.”

PwC, however, also highlighted relatively strong optimism for M&A plans among UK CEOs at the start of 2023, with 63 per cent of respondents to the firm’s latest CEO Survey saying they do not plan to delay their dealmaking activity this year. Lucy Stapleton said that PwC was seeing that "companies are still very much on the lookout for opportunities to transact to transform their business.”

Regarding the outlook for the year ahead, Stapleton added: “While cash rich corporates may still be able to move forward with deals, market volatility and uncertainty, coupled with some well-trailed failed syndications, mean that the debt markets remain extremely difficult for acquisition financing. Until this reverses, there is little incentive for anyone to be first to test the market.”

“Private equity is still sitting on a lot of dry powder. The mix of increased certainty and valuation recalibration, coupled with signs that inflation may have peaked and that interest rates could start to stabilise or rise in much smaller increments, mean this could be the catalyst for greater certainty in the deals market and for the big ticket activity in the UK to kickstart.”

PwC’s analysis showed that the busiest sector for UK M&A last year was industrial, manufacturing and automotive (IM&A), which accounted for around a quarter of the year’s total deal volume. The highest deal value, meanwhile, was in the Financial Services industry which accounted for £36 billion worth of deals, nearly a quarter of the UK’s total deal value last year, followed by IM&A (£29 billion) and Technology, Media and Telecommunications (£28 billion).

PwC UK’s Deals Industries and International Leader, Tim Allen, commented: “There is still an appetite in the market for deals in financial services, energy transition and where technology is involved, as companies are keen to increase their digital capabilities.”

“However, in the current climate companies will need to be more agile and have various M&A strategies and deploy different structures to navigate the current market conditions and be ready to capitalise when the market becomes more favourable, which we expect to see as the year progresses.”


Read more on the trends that could define M&A in 2023.

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