UK M&A Activity Q4 2023

UK deal activity in Q4 2023 has shown signs of recovery, with quarterly deal volumes and values trending upwards after 3 consecutive quarters of decline.

Rickitt Mitchell’s market analysis (powered by Pitchbook) shows deal value increased to £77.9bn in Q4 23 from £74.8bn in Q4 22, an increase of 4%.

Private Equity activity registered a 15% increase in deal count compared to Q3 23 – the first signs of recovery in capital deployment following a subdued 2023. Corporate M&A activity registered a strong recovery, delivering 71% Q-on-Q growth in deal value (to £36.9bn) and a 13% rise in activity to 815 deals. VC deals continued their marked decline, registering a further 1% drop Q-on-Q in activity (to 510) and a 29% reduction in overall value (to £3.9bn), reflecting a highly challenging environment for early-stage funding.

Overall deal volume for 2023 as whole dropped by 16% from 2022 and deal value declined to £235.9bn from £296.0bn (20% decline). However, there are signs of the downward trend reversing following the Q4 recovery seen.

UK M&A Activity Q4 2023

Sector Trends

B2B and B2C sectors delivered volume growth from Q3 23, increasing by 24% and 22% respectively. B2B saw a notable 151% deal value growth to £10.9bn, partly skewed by the £2.2bn acquisition of The Property Franchise Group by Belvoir Group, operators of resident property franchising.

Healthcare and TMT again proved resilient sectors with deal values increasing by 156% and 49% respectively (£18.5bn and £18.2bn) whilst volume dropped by 9% and 1%. These results highlight the resilience of multiples within these industries, proving attractive to Private Equity and Strategic buyers alike.

Neil Mitchell, Partner

“From a Rickitt Mitchell perspective, the Q4 2023 improving M&A backdrop highlighted above has continued into Q1 2024 and looks likely to continue on this trajectory based on our own pipeline. 

More broadly than the pulse of the Rickitt Mitchell engine room, inflation appears to be tapering and the figures for the year to January (4%) coming in slightly under consensus will help fuel expectations of interest rate cuts during the year.  This in turn can be a helpful catalyst for M&A activity as cash flow constraints ease and the financing support needed for deals becomes more predictable, if not indeed more keenly priced.  At present we see the UK General Election as a fairly benign event for the UK M&A market, pending surprises in the March budget and voter seeking polices that may be thrown out over the coming months.  Our view is that the US Presidential election result has more potential to impact the economy and hence deal activity in the medium term. 

UK M&A Activity Q4 2023

The ongoing market commentary around the level of dry powder that PE has to deploy (8% up in the year to Dec 23 according to Prequin – hard number irrelevant – it’s trillions) will continue but there is the question as to whether there is simply too much funding looking for a good home in a market that can’t support its deployment.  However, one positive thing is for sure; many private equity houses are readying assets for sale, with lots of “soft marketing” conversations taking place with potential suitors, even if the exact timing of when a formal process is launched has not yet been decided. 

In summary, 2024 is unlikely to be a vintage year for deal-doing but hopefully one that is moving in the right direction.  In closing, as a corporate finance firm that has been operating across the UK and internationally from the heart of the North-West for the last 43 years, the pace of change of personnel and firms across Corporate Finance and Private Equity is of definite note – we too will have positive news….watch this space."