Investment in mergers and acquisitions (M&A) is decreasing, as investors are choosing to engage in high-value transactions instead.

UK M&A Market Shows Stability Amidst Decline

The UK M&A market is exhibiting a sense of restrained momentum, according to Lucy Stapleton, global head of deals at PwC UK. Despite a 12.3% decline in the total value of deals from £65.3bn to £57.3bn, the current state of the market and the growing availability of investor capital suggest a stable environment for deal-making, provided wider issues are addressed.

The financial services sector led the pack in terms of deal value, pulling in £17bn. Apart from the industrials and services sectors, other well-performing sectors include technology, telecommunications, and financial services. However, the deal volume softened by 19.1%, with only 1,478 transactions in the first half of the year.

Stapleton emphasised that investors are focusing on resilient assets with long-term growth opportunities, rather than a large quantity of deals. They are not just chasing growth but are targeting sectors where structural change is creating long-term opportunity. This shift is reflected in the increase in average deal size, which reached £162.9m, due to a wave of fewer large-scale investments.

Analysts are optimistic for the second half of the year, but they warn that M&A market growth is not guaranteed. Stapleton further stated that there's a shift from passive optimism to active investment, with investors focusing on value creation, having a clear deal objective, and a willingness to deploy capital into sectors where growth is critical.

Macroeconomic stability and resolution of geopolitical uncertainties are needed to bolster favourable UK market conditions. Colin Smith, partner at PwC, stated that industry dynamics are playing a decisive role in shaping deal activity. For instance, Salzgitter AG, an investor in the industrial and service sectors, is expected to continue its investments in the second half of the year. Although the exact sector for further investments was not explicitly mentioned, the industrial participation area of Salzgitter AG includes various service companies and specialized automotive companies, suggesting ongoing interest in these fields.

Stapleton also mentioned that many deals remain paused due to ongoing market volatility. However, she suggested that when confidence returns, there may be a sharp uptick in activity, and those who are prepared will be best placed to seize the opportunity.

Investment in mergers and acquisitions (M&A) is decreasing, as investors are choosing to engage in high-value transactions instead.