London dealmaking slows to 14-year low amid private equity decline

The value of mergers and acquisition (M&A) deals made with UK involvement has fallen to a 14-year low in 2023, new findings show.

M&A deals with any UK involvement have a total value of £144.7billion in the year to date, down 45 per cent on levels seen last year, according to LSEG Deals Intelligence.

The value of dealmaking with UK involvement is at the lowest year-to-date total since 2009 amid the turmoil of the global financial crisis.

M&A involving a UK target has reached around £77billion so far this year, which is just over half the value recorded during the same period in 2022 following a 48 per cent decline in domestic M&A and a 49 per cent drop in inbound deals. 

The UK is the third most targeted country globally this year, after the US and China, with M&A involving UK targets accounting for 5 per cent of global M&A announced so far during 2023, according to the findings.

Sixty-five percent of UK target M&A involved an overseas acquiror, with the remaining 35 per cent involving domestic buyers. 

LSEG Deals Intelligence said the ‘mega-deal’ tally is at a six-year low, while the value of private equity-backed deals is at a five-year low, despite a ‘high deal count’. 

Lucille Jones, a senior Manager at LSEG Deals Intelligence, said: ‘In these uncertain times, with recession looming, M&A involving UK companies has declined 45 per cent to the lowest level in fourteen years. 

‘We are seeing double-digit percentage declines for both the domestic and cross-border deal categories, and declines have been recorded across all sectors.’

She added: ‘One of the few positives to note from our Q3 data is that, while down 22 per cent from last year, the number of deal announcements is historically high, at a level only exceeded three times in the last fifteen years.

‘A concerning outlook for the UK economy is curbing the enthusiasm for deal making in British boardrooms and we’re likely to continue to see a cautious approach to deal making in the coming months.’

Over four thousand deals have been announced so far this year, down 22 per cent compared to last year, but the fourth highest deal count in the last fifteen years. 

After the value of deals announced during the first quarter of the year slumped to the lowest quarterly level since the final quarter of 2009, M&A activity increased by 60 per cent in the second quarter of 2023 before falling 13 per cent in the third quarter, LSEG Deals Intelligence, said. 

Some analysts were gearing up for London-listed companies to be picked off as buyers capitalised on cheap prices, but a wave of takeovers has not materialised.

However, some bumper deals have been struck in the UK. The £5billion takeover offer for Dechra Pharmaceuticals by Swedish buyout group EQT represents the biggest deal involving the UK announced so far.