Private Equity M&A Report 2024
Welcome to the 2024 edition of our annual review examining deal terms and trends in the M&A and private equity markets. For the sixth year running we are delighted to work alongside Pinsent Masons and Howden M&A to pool our deal data, which we believe (as with previous years) provides the most comprehensive analysis of UK mid-market transactions available for review by buyers and sellers alike. We hope it continues to prove insightful in assisting benchmarking on what constitutes ‘market practice’.
A look at PE deal-making in the UK reveals a mixed picture but there are grounds for optimism.
A return to the Covid era boom of private equity-backed deal making in the UK is not anticipated in 2024, but we do expect deal volumes and values to pick up as the year goes on.
In 2023, the overall picture was one of lower deal volumes and values than we had seen in 2022, but our experience was of a market split very much in two.
The predominant position was of “stodgy” market conditions: deals taking longer than we would normally expect to complete and requiring bespoke structuring to reconcile the gap between buyer and seller valuations, or failing to materialise as negotiations broke down.
Those features of the market were influenced by high inflation and the cost of finance. This served to make some investors more risk averse and influenced the price they were willing to offer and the attractiveness of management terms on offer. A lack of competition between investors for deals due to uncertainty in the market also meant buyers could drive a harder bargain and led to due diligence and decision-making processes being prolonged.
On the other hand, there were pockets of the market that were buoyant. Businesses with high levels of recurring revenues, good cash flows and a consistent record of growth, such as healthcare and tech-enabled businesses, remained hot tickets. This was particularly true of technology assets, such as software-as-a-service companies, given the undiminished appetite across the economy for technology-enabled innovation and the efficiencies they drive.
Opportunities for investment in those businesses were seized upon by investors, which enabled sellers to run competitive auction processes to drive deals, shorten deal timetables and achieve better terms for vendors and management teams alike.
With investors dropping offer prices across many sectors and with high interest rates on senior debt serving to dampen value expectations as well as impacting the proportion of sweet equity offered to management, we nevertheless saw some creative deal-making in 2023.
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