The total value of mergers and acquisitions (M&A) in the UK saw a significant decline in 2023, reaching its lowest level since 2009. Figures compiled by London Stock Exchange Group’s Deals Intelligence team reveal a sharp drop in deal values, with the total amount falling from $395m to just over $265bn. This decline reflects the impact of rising interest rates and concerns over the UK’s economic outlook, which have led to a decrease in both domestic and cross-border deals, deterring foreign and local buyers alike.
The diminished M&A activity in the UK market contrasts with the global trend, as global dealmaking experienced a relatively modest 17% drop to $2.9tn. Despite predictions of an increase in public-to-private acquisitions, the first half of the year saw a downturn in dealmaking as rising interest rates inflated the cost of financing deals, while declining valuations made companies hesitant to engage in M&A activity. This reflects a cautious approach by businesses, driven by economic uncertainties.
The report from LSEG Deals Intelligence emphasizes the substantial decline of M&A involving UK targets in 2023, with a year-on-year drop of 45% to $120.2bn. Notably, the largest deal involved the acquisition of Dechra Pharmaceuticals, a UK veterinary pharmaceuticals company, by Swedish buyout group EQT for $6.1bn.
Lucille Jones, a senior manager at LSEG Deals Intelligence, highlighted the challenging landscape of dealmaking in 2023, underscoring the impact of economic jitters and rising interest rates on the market. Furthermore, the total number of deals involving British companies fell by 19%, totaling 5,508 deals, indicating a broader reluctance to engage in M&A activities.
Looking ahead, PricewaterhouseCoopers (PwC) forecasts a potential shift in the economic landscape, predicting that inflation will fall to near ‘normal levels’ in 2024. However, the projections also anticipate a surge in corporate insolvencies. This forecast suggests a complex environment for dealmaking, where businesses may face continued economic uncertainty and potential challenges despite the potential easing of inflation.
In summary, the decline in UK deal values in 2023 reflects a cautious market influenced by rising interest rates and economic concerns. As businesses navigate this environment, they may need to adapt their strategies in response to changing economic conditions, potential inflation shifts, and the broader landscape of M&A activity.
