UK Public M&A Review 2023
15 February 2024
Political and economic pressures from 2023
Following on from a string of remarkable years, 2023 was no less interesting. Global tensions remained heightened, as demonstrated by the ongoing war in Europe and the evolving conflict in the Middle East. US politicians kept us entertained and, whilst the UK only had the one prime minister in 2023, political pressures were no less fraught this side of the Atlantic.
In the UK, the year ended far less badly than many had predicted though. Recession was avoided, inflation fell faster than expected and many are arguing that interest rates have passed their peak. Going into 2024, it will be interesting to see whether election spending reverses any of these wins and whether the Conservative Party is able to avoid what feels like an unavoidable defeat.
And of course it's not just the UK going to the ballots in 2024. With around half the world's population being able to vote in at least one election this year, it is not surprising that this year has been widely-termed "the year of democracy". How much the polarising election in the US will impact on markets in the second half of the year remains to be seen.
The impact on the UK public M&A market in 2023 and possible outcomes for 2024
The best way to describe UK public M&A activity in 2023 would be variable. A weak start to the year was followed by an uptick in activity in Q2, a quieter summer and then a surge of activity in Q4 (40% of the firm offers announced in 2023 were announced in Q4). But even with this inflexion point in the final quarter, M&A by value was significantly down on preceding years.
Private equity bidders returned to the market but focused on small to mid-cap opportunities, with only four deals announced that exceeded £1bn. The emphasis on smaller companies was primarily driven by restricted debt markets and the associated increased costs of financing. One of the key drivers for higher activity in 2024 will without doubt be whether the lending markets return, enabling PE to deploy their considerable funds. On that front, there have been some positive signs in recent months and, with further stabilisation of inflation and interest rates, large-scale M&A should follow.
Another theme we expect to carry over from 2023 is increased shareholder engagement. Recent global disruption and the performance and perception of UK equity markets have resulted in traditional valuation metrics being questioned. We expect public company defences and shareholder activism to be major themes in 2024 as bidders return to the markets but valuation gaps remain.
Ashurst's role on announced deals in Q4
- Renewi on the unsolicited approaches by Macquarie.
- Equals Group on its strategic review and possible offers.
- Morgan Stanley on the offer for Smart Metering Systems by KKR.
- Cavendish on the offer for Ten Entertainment by Trive Capital and on the offer for Velocys by a consortium of funds.
- Goldman Sachs on the offer for OnTheMarket by CoStar.
- RBC on the offer for The Restaurant Group by Apollo.
- Bank of America on the offer for Tribal by Ellucian.
We hope you enjoy the insights and analysis in this publication and, as ever, we would be very happy to discuss any of the topics mentioned.
With very best wishes
The Ashurst UK Public M&A Team
