After a long period of inactivity, the UK's mergers and acquisitions market is starting to show signs of life. Over recent years, deal-making slowed down significantly, affected by economic challenges and global uncertainties. But as we move into the latter half of 2024, the situation is changing.
Portfolios are starting to appear on the market—often an early sign of a wider M&A recovery and a more favourable environment for corporate M&A activity. Could this be the beginning of a new phase for corporate consolidation? Let's take a look at what’s driving this recovery.
In a previous article, I mentioned that the interest rate increases were a factor in the lack of activity, which would take a few years to work through.
It has taken time but it feels like the rate increases have worked through portfolios and the current outlook of reducing rates will help bring the buyers and sellers yield expectations together driving more M&A activity.
The prospect of a new government brought a sense of optimism into boardrooms across the country. Change, while often unsettling, can also open up new opportunities.
In addition, the feared wave of defaults and arrears hasn’t materialised, easing worries for business leaders and encouraging decision-makers to revisit strategic plans that were previously on hold.
The M&A market may be waking up, but it's still early days. The focus for now remains on transactions that offer clear value and lower risk. Large, complex deals are still mostly on hold. It’s as if the market is testing the waters before diving in.
There have also been a number of high-profile deal failures recently, which reminds us that many companies are still being cautious.
So, what does the future hold? The outlook suggests a slow but steady increase in M&A activity. However, this depends on the continued stability of interest rates, the overall economy, and the reaction to the forthcoming Budget.
One thing is clear, the appetite for deals is there but we’re likely in for a period of cautious deal-making, with a focus on value and strategic fit.
Keep an eye on this - 2024 could see the M&A market come back to life. Will you be ready when it does?
