M&A activity declines as investors opt for high-value deals
UK merger and acquisition (M&A) activity declined in the first half of the year, as investors sought strategic deals amid market volatility.
The total deal value of UK M&A declined 12.3 per cent from £65.3bn to £57.3bn according to a report from professional services group PwC.
Deal volume also softened with just 1,478 transactions in the period, a bruising 19.1 per cent decline.
Lucy Stapleton, global head of deals at PwC UK said, “The UK M&A market has been characterised by a sense of restrained momentum.”
“There’s a strong pipeline of deals ready to go, but many remain paused due to ongoing volatility.”
Deals: Quality over quantity
Despite the decline in the number of deals, the average deal size reached £162.9m.
This was driven by a wave of fewer large-scale investments, as investors opted for resilient assets with long-term growth opportunities over a large quantity of deals.
Stapleton said, “Investors are focusing on value creation, with a clear deal objective and a willingness to deploy capital into sectors where growth is critical.”
“When confidence returns more broadly we may see a sharp uptick in activity, and those who are prepared will be best placed to seize the opportunity.”
According to PwC, investors primarily chose to inject capital into the industrials and services sectors, which collectively attracted 400 M&A deals.
Other well-performing sectors included financial services, technology, and telecommunications.
In terms of deal value, financial services topped the charts, pulling in £17bn, largely driven by four ‘mega deals’.
Colin Smith, partner at PwC, said, “Industry dynamics are playing a decisive role in shaping deal activity.”
“The data shows that investors are not just chasing growth but are targeting sectors where structural change is creating long-term opportunity.”
Second half outlook
Analysts are optimistic for the second half of the year, but warned M&A market growth is not guaranteed.
They argued “macroeconomic stability and resolution of geopolitical uncertainties” are needed to bolster favourable UK market conditions.
The current state of the UK market and growing availability of investor capital suggests a stable environment for deal making is possible if wider issues are fixed.
Stapleton said, “The fundamentals are encouraging as interest rates are easing, liquidity is improving, and equity markets are strong. We’re seeing a shift from passive optimism to active investment.”