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UK M&A deal activity to improve having hit rock bottom

by LLB Finance Reporter
5th Oct 23 6:18 am

UK M&A activity is set to improve over the next 12 months according to 78% of dealmakers who took part in CIL’s Investment 360 Index survey.

This is welcome optimism after the majority (84%) said that deal activity is currently low, compared to 35% at the same time last year.

Having hit ‘rock bottom’, with no respondents seeing deal activity getting worse, the improvement is expected to be gradual – with only 6% of respondents expecting the next phase to see a ‘significant’ increase compared to 72% who expect a ‘moderate’ increase.

The Index is based on research with 143 UK market stakeholders, including private equity investors, management teams, corporate finance providers and business advisors, and has been run by CIL, the independent international management consultancy, since 2017.

Overall, respondents are optimistic about the M&A environment over the next year. Almost two thirds of dealmakers (66%) surveyed said that the assets currently available to invest in are of average quality, 19% say they are good and 15% regard them as poor.  However, 48% expect this to improve over the next 12 months, 38% predict no change, with just 14% expecting a decline in the quality of assets to invest in.

The shift away from a seller’s market to a buyer’s market has gained ground in the last few years. This year, just over half of respondents (52%) see the current M&A market as favourable to buyers, compared to 37% last year. Respondents indicate that the rising cost of capital, higher interest rates and tightening credit conditions combine with macro-economic uncertainty to reduce competitive intensity within M&A.

Commenting on the findings of the Investment 360 Index, Alex Marshall, Senior Partner at CIL, said, “None of our respondents think deal activity could get any worse – we’ve hit rock bottom.

“The only way is up from here, and it’s good to see some optimism about M&A over the next 12 months. Investors consider it to be a buyer’s market: higher costs of capital, tighter credit conditions and macro-economic uncertainties are combining to reduce competition for assets.”

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