Mid-market M&A remains resilient as UK market hopes for deal surge
Mid-market deal activity in the UK has remained resilient despite a fall in the overall level of deals year-on-year, according to new data from Big Four firm PwC.
In the first half of the year mid-market deals worth less than £1bn increased 1.8 per cent in the UK as smaller deals remained easier to finalise than larger equivalents, which fell 42 per cent, amid a difficult financing and regulatory environment.
Lucy Stapleton, head of deals at PwC UK, commented: “The mid-market is continuing to hold up as cash-rich corporates look for strategic opportunities and we may see more bolt-on transactions as well as sell-sides as private equity and corporates start to prepare to exit businesses.”
Despite the difficult conditions, deals at all levels remained at pre-covid levels with 1,902 mergers signed in the first six months of the year.
Although this was 21 per cent lower than last year, Stapleton noted that the UK M&A market had been “resilient”.
Technology, media and telecoms saw 511 deals in the first half, accounting for over a quarter of deals in the first half of the year. Manufacturing and automotive saw 466 deals while consumer markets saw 393.
Lingering inflation and rising interest rates in the UK have sparked wild swings on markets over the past year and caused a major slowdown.
Tim Allen, deals industries and international leader at PwC said that deal opportunities were most obvious in areas technological advancement, such as AI, and the energy transition.
Deals involving private equity have crept up from last year, with private equity participating in 39 per cent of deals compared to 37 per cent last year. Hugh Lloyd Ellis, private equity leader at PwC, said this would likely increase over the course of the year.
“There are still record levels of dry powder within private equity and as we look towards the second half of the year, any sense of stability entering the market would see confidence return.
“We continue to see various bilateral situations, minority deals and public-to-private attempts with investors seeing value in our public markets as the UK continues to compare attractively against the dollar,” he continued.
A slew of UK-listed firms have been taken private in recent months, including Gresham House earlier this week, as foreign buyers have been attracted by the relatively cheap valuations on offer.