M&A activity in the UK apparently fell to a seven-year low in the first half of 2023, as rising interest rates and economic uncertainty have reduced buyers’ overall appetite to finance deals.  The knock-on disconnect between how sellers and buyers then value businesses, has led to sellers becoming more reluctant to sell in the current economic environment.

The value of deals fell 51% to £87.98 billion, and the volume of deals fell 26%.  The steeper decline in the former was driven by a drop in megadeals, defined as those with an enterprise value of over £3.9 billion.

A decline in private equity activity, attributed to both cost of funds and increased regulatory scrutiny in a number of previously ‘busy’ sectors, has also been a marked characteristic.  For commentators, M&A activity is expected to remain weak in the second half of the year, with opinion then divided into early 2024 – with some analysts believing that the market could well pick up as interest rates start to fall and economic uncertainty eases.

In our world, established and successful private businesses (the like of which we work with!) remain hugely attractive to buyers.  At Magma, our Corporate Finance team have never been busier – perhaps our dedicated and strategic approach to deal making holds up in more challenging market times.

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