BY Fraser Tennant
The number of M&A deals in the UK is expected to rise significantly in the next 12 months as part of a return to post-pandemic normality, according to a new report by Ansarada.
The ‘Top UK Dealmakers’ M&A Predictions 2022’ report, which polled senior executives from 50 UK-based firms across investment banking, private equity and M&A, reveals that 90 percent of respondents believe that the number of M&A deals in the UK will increase in the next 12 months, including 54 percent who believe it will increase significantly.
The report also found that more than half of respondents expect the number of distressed deals in the UK to rise over the same period, reflecting a difficult period for UK businesses which have faced disruption to supply chains in the midst of the pandemic and Brexit headwinds.
However, the research notes that even Brexit has not dented sentiment in investment opportunities, with 40 percent of respondents stating they expected the UK to become a more appealing venue for cross-border investment as funds benefit from the ability to buy companies at a favourable foreign exchange rate now that Britain has left the EU.
“There is much for investors to be optimistic about and confidence is running high,” said Sam Riley, chief executive of Ansarada. “Most expect even more M&A activity to come, including anticipation of rising special purpose acquisition company (SPAC) activity, which has so far been slow to take off compared with the US market.”
In terms of sectors, one third of respondents highlighted the technology, media and telecoms (TMT) sector as driving the most activity due to wide increases in digital consumption and connectivity. Additionally, 70 percent of survey respondents said they also expected increased activity in distressed M&A to be across industrials and chemicals, real estate and construction, energy and mining, and utilities.
Despite the increase in sentiment across the UK M&A market, however, significant challenges remain. “Deals are still susceptible to a complex mix of extenuating situations,” said Stuart Clout, chief revenue officer and global head of growth at Ansarada. “As we have seen, driver shortages and supply chain disruption in the UK has severely hampered UK businesses recently, and the largely expected surge in COVID-19 cases locally is of course something to be mindful of.
“These events will have knock-on consequences for dealmakers,” he concluded. “Deal speed, preparation and quality due diligence is going to be essential if the expectations from the dealmakers we surveyed are to be met.”