2023 has proven to be a difficult year for the UK’s dealmaking ecosystem, with a recent report by the London Stock Exchange Group’s Deals Intelligence Team revealing that the total number of acquisitions involving UK firms fell by 33% to just $265bn over the course of the year.
The collapse of headlining-grabbing deals including, ADOBE-Figma, certainly played a significant role in the declining valuation of M&A activity, spurred on by the BoE increasing interest rates to their highest level in over fifteen years, discouraging risk amongst investors. According to M&A expert and CEO/Founder of leading business advisory Trachet, Claire Trachet, 2024 will be the year of the mid-sized merger as investors look towards undervalued UK businesses.
Towards the end of 2023, the number of deals involving UK companies hit their highest quarterly total since mid-2022, whilst the amount of private equity firms buying UK businesses increased to 915, the highest number of buy-ups since records began. One UK business that’s become increasingly popular amongst overseas investors is the UK retailer Pets at Home Group Plc with an informal poll from Bloomberg sitting the company alongside Covestro, Inwit and Vivendi.
Speculators have also kept a keen eye on the pharmacy chain Boots making a potential return to the London Stock Exchange as the US group Walgreens looks to split from the UK chain. Following a lacklustre year for IPOs, analysts expect a possible return by Boots to thaw the UK’s frozen market. According to Claire Trachet, news of a partial recovery within the M&A sector should inspire confidence amongst founders and investors alike, with the growth of overseas capital and renewed interest in the LSX providing a glimmer of hope to founders looking to pursue an exit.
Commenting on this, Trachet CEO and founder, Claire Trachet, said: “Despite a lacklustre 2023, defined by the shrinking of available capital flows and the collapse of headline deals, including Adobe-Figma. Founders, investors and analysts alike ought to remain optimistic for 2024, the growth of deals involving UK companies hit their highest quarterly total in the final three months of last year, whilst private equity firms filled the gap left by traditional institutional funding.
“This year, analysts should turn their attention towards the mid-sized merger, as overseas investors look towards the acquisition of undervalued UK firms. I expect that much of the UK’s M&A activity will be determined primarily on the smaller stage, as SMEs and scale-ups continue to be bought out. For founders, spring is just around the corner.”
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