UK M&A activity falls by almost a fifth in 2023, but cautious optimism grows as economic conditions stabilise

• UK deal activity shows the Technology, Media and Telecommunications (TMT) sector saw the most activity for 2023

• Energy, Utilities and Resources saw the highest deal value

• PwC analysis shows that while the majority of UK deals in 2023 were led by corporates, the number of deals involving private equity reached its highest level at 42%

UK M&A activity in 2023 fell below the levels seen the previous year as economic headwinds continued to affect the number of deals completed in the year, according to PwC’s latest Global M&A Trends 2024 Outlook. However, activity for 2023 is still at pre-pandemic levels and as economic conditions ease, confidence is expected to return to the market.

In total, the UK saw 3,628 deals across 2023, compared to 4,362 the previous year, a 17% decline, almost triple the rate of decline in global deals volumes of 6% over the same period. Further analysis shows a drop in deal volume during the second half of 2023 (H2 2023) of almost 600 deals compared to the first half of the year (H1 2023). The volume of activity seen in H2 2023 is the second lowest in the last five years, next to the first half of 2020 which was affected by a slump in dealmaking early in the pandemic.

There was a total of £46bn worth of UK deals in H2 2023 compared to £42bn in H1, bringing the total deal value for the year to £88bn. However, total deal value in 2023 was down 41% compared to almost £150bn worth of deals seen in 2022.

Lucy Stapleton, head of deals at PwC UK, said: 

“While the macroeconomic environment is still challenging, overall, we are in a much better place than we were a year ago with inflation steadily falling and while interest rates are still higher than recent times, they have stabilised.

“There is still an appetite for deals - our recent CEO Survey shows more than half of UK CEOs expect to make at least one major acquisition in the next three years and that the UK is the top investment target for US CEOs, while also becoming an increasingly popular place to invest for Chinese businesses. 

“We expect the most robust areas of the market, underpinned by societal megatrends, will continue to drive deal activity such as healthcare whilst the fast pace of developments in AI and net zero will be key drivers for dealmakers.”

Industry M&A trends

Industry analysis of UK deal activity shows the Technology, Media and Telecommunications (TMT) sector saw the most activity for 2023 (955 deals), accounting for just over a quarter of total output for the year. Industrial Manufacturing and Automotive followed with 899 deals and also saw the most deal activity for H2 with 390 deals announced.

In terms of value, the Energy, Utilities and Resources  industry saw deals with the highest value in 2023 with a total just over £18bn worth of transactions, however, deal values are down 24% compared to the previous year which saw £24bn worth of deals. Financial Services followed with just under £18bn (down 51% compared to 2022) and Health Industries with £15bn (up almost 80% compared to 2022).

Tim Allen, Deals Industries and International leader at PwC UK, said: 

“We are seeing cautious optimism about the deal environment with dealmakers showing increasing confidence after the recent economic shocks that have affected the M&A market.

“Companies’ needing to add new technology capabilities, such as Generative AI, are driving deal volumes in the TMT sector whilst energy transition across the board is supporting activity in the Energy, Utilities and Resources sector.  The healthcare industry has also proven resilient. 

“With more than half of UK organisations saying they view transactions as the best way to keep up with market changes, we expect to see companies making strategic deals to keep their businesses viable.”

Private Equity

PwC analysis shows that while the majority of UK deals in 2023 were led by corporates, the number of deals involving private equity reached its highest level at 42%, up five per cent from 2022 and an increase of almost 14% since 2018.

Hugh Lloyd Ellis, Private Equity leader at PwC UK, said:

“With stability returning to the investing environment, significant dry powder and increased pressure from Limited Partners to return capital, many fundamentals point towards more dealmaking in 2024. However, with the higher cost of capital, the ability to generate satisfactory returns will mean deals will have to have a robust view on value creation potential to justify valuations.”

Notes to editor

PwC’s Global M&A Industry Trends is a semi-annual analysis of global deals activity across six industries — consumer markets (CM), energy, utilities and resources (EU&R), financial services (FS), health industries (HI), industrial manufacturing and automotive (IM&A), and technology, media and telecommunications (TMT). 

About the data: We have based our commentary on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by the London Stock Exchange Group (LSEG) as of 31 December 2023 and as accessed on 3 January 2024. This has been supplemented by additional information from Preqin, S&P Capital IQ and our independent research. Certain adjustments have been made to the source information to align with PwC’s industry mapping.

UK M&A values were converted to GBP using the GBP/USD 2023 average rate of 1.244

Findings from PwC’s 27th Global Annual CEO survey can be found here: https://www.pwc.co.uk/ceo-survey.html . The survey finds the UK is the top investment target for US CEOs and rose ten places to sixth among China’s CEOs 

PwC’s Transact to Transform report findings can be found here: https://www.pwc.co.uk/issues/value-creation/insights/value-creation-transformation-survey.html. The survey finds 56% of senior executives see transactions as the best way to keep up with the speed of change in their market.