As the mergers and acquisitions (M&A) landscape in the UK continues to evolve, it is important for businesses to stay up to date on the latest trends in order to make informed decisions about their future.

Let’s take a look at an M&A data & trend report by Dealsuite to see what we can expect in the M&A market in the UK in 2023.

Transactions

One trend we are expecting to see in the UK M&A market in 2023 is a slight increase in the number of buy and sell-side transactions.

The Covid-19 pandemic has had a significant impact on the economy, and many businesses have had to adapt to new challenges and uncertainties.

As a result, we may see more companies looking to merge or acquire other businesses in order to strengthen their operations and position themselves for long-term success.

Assignments

Four out of five advisors reported an increase in assignments in the M&A market in the UK and Ireland.

This demonstrates the continued strength of the M&A market in the first half of the year.

It is important to note that some assignments may take until H2-2022 to close or may be cancelled altogether.

Overall, these results suggest that M&A assignment activity is likely to remain robust in the near future.

Sector Multiples

The average EBITDA (a valuation measure for a company) multiple in the UK and Ireland slightly decreased to 5.40 in 2023.

Interestingly, this average multiple varied significantly by industry, ranging from 3.6 in Construction & Engineering to 8.4 in Healthcare & Pharmaceuticals.

This highlights the importance of industry in determining the value of an SME in the M&A market.

This trend may also be influenced by a variety of factors, including economic conditions, competition, and changes in consumer behaviour.

Cross-border deals

The UK and Ireland have seen an increase in cross-border M&A activity in the past five years, with a higher percentage of SME transactions involving international parties.

This trend is likely driven by the benefits that cross-border deals can bring, such as higher selling prices and a better fit for businesses.

In addition, the healthcare and pharmaceutical and wholesale trade sectors in the UK and Ireland have higher EBITDA multiples compared to other western European countries.

Additionally, 42.1% of sellers were open to a cross-border deal in H1-2022, and 18.2% of completed transactions in the SME market involved a foreign buyer or seller.

These results suggest that there is significant potential for growth in cross-border M&A activity in the SME market.

Inflation and increase in interest rates

The UK and Ireland are currently experiencing strong inflation and an increase in interest rates, which can impact M&A activity in a variety of ways.

According to advisors, inflation can lead to lower selling prices and decreased financing availability, while interest rate increases can also decrease financing availability and lower selling prices.

However, not all advisors reported negative impacts, with some indicating that there was no difference in the number of businesses offered or for sale due to these economic factors.

It is important for businesses and advisors to consider the potential impacts of inflation and interest rate increases on M&A activity, as these factors can affect the success of transactions.

Buyer intent per sector

Overall, the M&A market is currently a seller’s market, with demand exceeding supply.

The demand for companies varies by sector, with the highest demand in the IT Services & Software Development and Construction & Engineering sectors.

The Retail Trade and Hospitality & Tourism sectors have lower demand, while the average across all sectors is 9.2 interested parties per company.

These results suggest that there is strong demand for companies in the M&A market, and that the supply of available companies is limited in comparison.

This can be beneficial for sellers, but may also make it more challenging for buyers to secure the companies they are interested in acquiring.

Outlook

Overall, the majority of advisors are satisfied with the performance of the UK & Ireland M&A mid-market in H1-2022 and are optimistic about the outlook for H2-2022.

While some uncertainty remains in the market, the majority of advisors (69%) expect the market to remain strong or improve in the coming months.

These results suggest that the M&A market in the UK & Ireland is likely to remain active in the near future.

Stay prepared

The M&A market in the UK and Ireland is constantly evolving, and it is important for businesses to stay up to date on the latest trends in order to make informed decisions about their future.

By staying proactive and working with experienced advisors, businesses can position themselves for success in the ever-changing M&A landscape.

If you’re looking for advisors to buy or sell a business, give us a call to help you through the M&A process!