UK M&A hits 14 year low, but signs of recovery emerge

M&A activity in the UK fell by a third this year to its lowest level since 2009, amid widespread economic uncertainty and persistent high interest rates. According to new figures, the total value of deals involving UK companies stood at just $265 billion (£207 billion) in 2023, down 33 per cent from $395 billion (£310 billion) in 2022.

The figures, which were compiled by London Stock Exchange Group’s Deals Intelligence team, show a continuation of the decline in M&A activity that has occurred since the post-pandemic boom of 2021, when deal value soared to $658 billion (£517 billion).

While there has been an overall drop in global dealmaking, the trend was far more pronounced in the UK, with M&A down 17 per cent worldwide. Domestic UK deals and cross-border deals involving UK companies both saw double-digit declines, dropping 37 per cent and 49 per cent, respectively.

The value of deals in which UK firms were the acquisition target fell 45 per cent to $120 billion (£94 billion). However, UK firms were more active in acquiring overseas targets, with the value of outbound deals involving a UK buyer rising 12 per cent to $104 billion (£81.6 billion).

The volume of deals involving UK companies also fell significantly, according to the report, dropping almost a fifth (19 per cent), with 5,500 deals in 2023.

Lucille Jones, senior manager at LSEG Deals Intelligence, commented: “Steeply rising interest rates and a concerning outlook for the UK economy, combined with stricter antitrust enforcement and ongoing geopolitical tensions curbed the appetite for deal making in 2023.”

“M&A involving UK companies declined 33% to the lowest level in 14 years, with double-digit percentage declines for both the domestic and cross-border deal categories, and across all sectors.”

However, there have been positive signs, hinting at the possibility of a recovery in M&A activity during 2024. Crucially, private equity activity involving UK targets saw deal volume increase to 915 acquisitions, the highest figure since records began in 1980, although the value of these deals fell 41 per cent to $41 billion (£32.1 billion) from $70.5 billion (£55.3 billion) in 2022.

Despite the drop in private equity deal value, reflecting a broader fall in UK company valuations, the increase in deal volume suggests that private equity firms are more prepared to deploy the vast cash reserves they’ve built up over recent years – something that is seen as potentially being a major driver of a possible M&A recovery in 2024.

There is also optimism as a result of recent improvements in the UK economy. Inflation has fallen from highs of 11.1 per cent in late 2022 to 3.9 per cent in November 2023, leading to predictions that interest rates may be cut, helping to create a more favourable M&A environment.

There were also improvements in M&A during 2023, with deal value hitting the highest quarterly level since mid-2022 during the final quarter of the year, after beginning with the lowest quarterly value since Q4 2009 during the first quarter.

Lucille Jones added: “On a positive note, the year ended more strongly than it began, and with inflation coming down and rates normalising, it could give CEOs and boards a little more confidence with which to plan their moves in 2024.”


Find out more about UK M&A trends:

Survey: UK dealmaking should improve within a year

Companies increasingly looking to M&A to keep up with changing industries

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