The UK M&A landscape in 2024 has been a rollercoaster of activity, with significant deals, shifting market dynamics, and a few surprises along the way. As we approach the end of the year, it’s a good time to reflect on how the market’s performed compared to earlier predictions, and what might be ahead.
A year of resurgence
At the start of 2024, many experts anticipated a cautious rebound in M&A activity, following a subdued few years. Factors such as economic uncertainty, geopolitical tensions, and fluctuating interest rates had previously dampened deal-making enthusiasm, along with the prospect of the then-impending general election and what it might mean for CGT and other business-centric issues. However, as the year progressed, the market showed remarkable resilience.
According to PwC, in the first half of 2024 the total value of UK deals reached £68bn, a 66% increase compared to the same period in 2023. Of course, different companies use different data and analysis methods, with S&P Global Market Intelligence reporting an even higher surge, with an announced UK M&A transaction value of £85.05bn for the first half of 2024, more than doubling the £37.08bn recorded in the same period last year. Whichever one you go with, this is a major uptick that was boosted by 16 deals coming in over the £1bn mark, collectively worth £42bn, a significant rise from the seven such deals totalling £17bn in H1 2023.
Something that might seem surprising is that the second half of the year has been even stronger. With the general election out of the way unexpectedly early, the market was able to grab on to a bit more certainty and pick up speed ahead of the budget. The long-running fear of a CGT increase still loomed, and meant a whole host of deals were ramped up and pumped out ahead of the end of October deadline. With that now out of the way, and not as drastic as many had feared, the market was once again able to get back to business with much greater certainty than at any time over the past few years. And the business they’ve got back to is BIG, with four deals that completed in late November totalling £5.3bn and securing the UK’s position as the biggest M&A hub in Europe this year.
Stellar sectors
Several sectors stood out this year and will be well worth keeping an eye on as head into 2025:
- Tech and telecoms: 2024 has seen a lot of activity in this space, including one of the year’s biggest acquisitions involving a UK target with US private equity house GTCR taking a 55% stake in WorldPay for around £9.99bn. But the talk of the town is still the deal between Vodafone and Three, announced in June 2023. The combined entity aims to create the UK’s largest mobile network, and the Competition and Markets Authority (CMA) has OK’d the deal subject to a commitment to significant investment in 5G infrastructure over the next decade.
- Construction: In May, Barratt Developments’ shareholders approved a £2.5 billion acquisition of Redrow plc, aiming to consolidate their market position and achieve operational synergies. The deal completed in August, with final CMA clearance received in October and an intense integration process is now underway to deliver at least £90m of cost synergies. With the government’s significant infrastructure and ESG commitments we’re seeing more and more activity in construction and related industries, with those offering sustainable methods and materials emerging as hot commodities.
- Wealth Management: In March, PE firm Pollen Street Capital announced its acquisition of Mattioli Woods, a UK wealth management and employee benefits provider, in a deal valued at £432 million. This move aims to leverage Mattioli Woods’ established market presence and Pollen Street’s expertise to drive growth and innovation. This is just one example of the significant consolidation happening across the sector.
- Professional Services: The legal sector has witnessed transatlantic mergers, with UK law firms seeking to expand their presence in the lucrative US market. For instance, Allen & Overy merged with Shearman & Sterling, and Herbert Smith Freehills combined with Kramer Levin, reflecting a strategic shift towards global expansion.
- Defence and aerospace: With multiple significant conflicts across the globe this industry has seen a huge surge, and this is only set to continue, with recent estimates expecting the global military drone market alone to reach £37 billion by 2032. As major players scramble to add cutting edge capabilities to their portfolio we’re seeing consolidation across the sector, and hot competition for some of the niche technology players.
Cross-sector themes
As a sector-agnostic advisory firm, LAVA follows interesting themes rather than specific industries, so we have a rare insight into the trends happening across the board. We’ve worked on everything from ESG to education, aerospace to aggregates, and there are some common themes that can get you set for success in 2025:
- ESG is no longer a side of desk issue: ever-more acquisitive companies are embedding a deeper focus on ESG into their M&A strategies, with more than 70% having walked away from deals due to ESG issues. Embedding ESG into everything from strategy to supply chain can significantly increase the chances of a successful sale.
- Prioritise process: Investing in your organisation ahead of any potential transaction is proving worthwhile as acquirers are looking for risk mitigation and a clear path forward for the companies they acquire. Strategic technology or resource investment can directly increase your valuation.
- Data is your friend: It may not be sexy, but good, solid data can really set you apart in a process as complex as M&A. Ensuring you have everything you need about financials, personnel, processes and growth opportunities available, and analysable, can significantly de-risk the due diligence process.
- Consolidation is king: With ongoing economic challenges and rising employer costs, large acquirers are taking the opportunity to snap up smaller players who may struggle to weather the storm alone, adding valuable IP, capability, or market reach to their portfolios. So, if you’re a smaller firm thinking about selling, this could be a great time.
What comes next
As we move into 2025, the outlook for M&A remains positive. The momentum gained in 2024 is expected to continue, supported by more stable economic conditions and sustained investor confidence, but market participants will need to remain vigilant, considering potential regulatory challenges such and global economic shifts, as well as taking proactive steps to ready themselves ahead of any potential transaction.
We’re expecting further significant growth and consolidation in the defence and aerospace sector, as well as an ongoing emphasis on wealth management and professional services as more firms seek to bolster their geographic reach or portfolio of offerings via acquisition. All in all, it’s been a great year for M&A and we’re all set for another one in 2025.
