MHA | UK M&A deal activity in 2021

UK M&A deal activity in 2021

Posted on: December 20th 2021 · read

I Stock 485967825

Recent research published by the Office of National Statistics (“ONS”) and Experian MarketIQ shows that UK M&A activity remains bullish, albeit deal volumes have fallen compared to the highs seen in the first half of this year. 

“The M&A market remains strong despite a recent slowdown in activity. The rate at which UK and global deal activity has recovered in the last 12-15 months has been very encouraging.”

Laurence Whitehead, MHA Corporate Finance Partner

The ONS reports that there were 136 completed deals in September, down from 164 in June 2021 and well below the elevated levels of activity seen in Q1.  There has been a fall in deal values across inward and domestic M&A deals in Q3, but a sharp increase in the value of outward M&A deals.  Outward M&A values climbed significantly to £32.8bn in Q3 from £8.2bn in Q2, boosted by the £10bn acquisition of Alexion Pharmaceuticals by AstraZeneca.  Inward M&A values fell to £10.7bn in Q3 from £28.7bn in Q2 while domestic deal values were also down to £3.1bn in Q3 from £4.4bn in Q2.

Experian MarketIQ recently reported that deal activity in the second and third quarters of 2021 was slightly more moderate after the frenzy of deal making in Q1, when the number of M&A deals in the UK reached record-breaking heights.  There has been a clear shift in the deal landscape, with the flurry of fundraisings, restructurings, and rights issue-type transactions earlier in the year giving way to more traditional acquisitions and buyouts. In all, there were 5,137 transactions announced during the first nine months of the year, up by more than a fifth on the 4,277 recorded at this point in 2020.  Pleasingly, almost every region of the UK saw double-digit growth in both the volume and value of M&A on a year-on-year basis, with strong activity in the large and mid-market value segments and there has been a real surge at the top end of the market, pushing the total value of UK M&A to £255bn, which is the highest Q1-Q3 figure since 2018.

From a sector perspective, M&A in the tech sector has been the quickest to recover from the pandemic, almost back at pre-Covid levels by mid-summer 2020.  Activity has really gathered speed since, and tech now sits comfortably as the UK’s main driver of deal activity. Digital acceleration has meant that tech now plays an increasingly vital role across multiple industries, creating opportunities for M&A, and this year we’ve seen extremely strong levels of deal making in areas like fintech, cyber security, e-commerce, and digital healthcare.  Elsewhere, there was robust year on year growth across a range of industries, with rising deal volume in the wholesale and retail, support services and transport sectors standing out. Real estate was the only major deal making sector to record a small (1%) year on year decline.

Geographically, Greater London remains the most active region, with 38% of the deal volume (1,956 deals), followed by the Southeast with 874 deals (17%) and the Midlands with 15% (745 deals).  All regions of the UK saw an increase in deal volumes compared to the same period in 2020, with the Southwest, Scotland and Northern Ireland all recording volume increases of over 40%. 

Access to credit for M&A is both readily available and very cheap in a historic context, with the number of debt-funded deals up by 18% this year. Companies looking to raise debt finance to support acquisitions can avail themselves of an increasing array of potential funding sources.   There has also been an upturn in the number of public companies using their shares to acquire companies and an extremely active private equity market, with many leading houses sitting on high levels of cash ready for investment.

We consider that the short-term outlook for UK M&A activity remains favourable but caution that there may be macroeconomic headwinds to navigate in the medium term as inflation continues to rear its ugly head all over the world, interest rate rises internationally and domestically may be implemented and quantitative easing may continue to be tapered down by many central banks. 

Find out more

If we can help with your business acquisition strategy, please get in touch with one of our corporate finance advisers by completing our online enquiry form

Share this article
Related tags