The Dwindling State of UK Takeover Deals

The value of takeover and merger deals involving UK companies has reached a low point not witnessed since the financial crisis, with a total of $265.4 billion over the past year. This signifies a 33% decrease from the previous year and is the lowest figure recorded since 2009, according to data from LSEG (London Stock Exchange Group) Deals Intelligence.

The decline in takeover and merger activity has been attributed to a combination of factors, including higher interest rates and concerns over geopolitical tensions. The year commenced at a slow pace, with the first quarter being the quietest for dealmaking since the end of 2009. Overall, there were 5,500 deals announced during the year, a 19% decrease from 2022.

Private equity firms were responsible for approximately $41.4 billion worth of deals targeting UK companies, with takeovers such as Apollo’s buyout of Wagamama owner, The Restaurant Group. The largest deal announced so far in 2023 with UK involvement was the proposed €14 billion move by Permira and Blackstone to buy classifieds firm Adevinta.

Lucille Jones, senior manager at LSEG Deals Intelligence, shared her insights, stating that “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.”

Looking ahead, Jones also provided a more optimistic perspective, suggesting that “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.”

The subdued state of takeover and merger deals in the UK signifies a challenging economic backdrop and a number of distressed sales. However, there is hope for a potential turnaround in the coming year. With cautious optimism, it remains to be seen how the landscape for M&A activity will unfold in 2024.

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