Value of UK M&A activity hits 14-year low amid subdued backdrop, but 2024 outlook brighter

Value of UK M&A activity slides to lowest level since 2009 – but year ending more strongly than it began gives cause for optimism.

Private equity deals this year include Apollo's buy-out of Wagamama owner The Restaurant Group. Picture: PA.

The value of UK takeover and merger deals has slipped over the past year to its lowest level since the financial crisis amid the gloomy economic backdrop, according to a new report.

Mergers and acquisitions (M&A) including UK firms or funds totalled $265.4 billion (£207.6bn) over 2023, a 33 per cent year-on-year slump and the lowest figure since 2009, new data from LSEG (London Stock Exchange Group) Deals Intelligence shows. The decline in activity has been blamed on a combination of higher interest rates and concerns over geopolitical tensions.

The year started with a particularly weak first quarter, which marked the quietest three-month period for dealmaking since the end of 2009, the study found. However, the year ended with deal announcements worth $91.5bn in the fourth quarter, the highest three-month total since the second quarter of 2022. In total, 5,500 deals have been announced this year, down 19 per cent against 2022, as valuations were also weaker in the face of the challenging economic backdrop and a number of distressed sales.

Private equity firms have announced about $41.4bn worth of deals targeting UK companies in 2023, with takeovers such as Apollo's buy-out of Wagamama owner The Restaurant Group, while the largest transaction with UK involvement announced so far this year is the proposed €14bn (£12.2bn) move by Permira and Blackstone to buy classifieds firm Adevinta. Additionally, the value of UK outbound M&A has increased 12 per cent year-to-date to US$103.7bn.

Lucille Jones, senior manager at LSEG Deals Intelligence, said: "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 per cent 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. 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."