How much of this is a response to Brexit? Almost a third (30%) of UK executives list their need to secure supply chains and respond to trade or regulatory changes as their main strategic deal driver, while the UK’s top overseas deal destinations are Germany and France. But supply chain concerns go beyond Brexit. The pandemic continues to highlight supply chain vulnerabilities, as it has an increasing focus on ethics and sustainability. Companies are also looking for adjacent deals that address the increasing blurring of boundaries between industries, with 27% of companies listing sector convergence as a driving strategic force in their acquisitions.
In 2020 the UK M&A market initially stalled, but recovered strongly, driven by the imperative to transform and the continuing attractiveness of UK assets. The value of UK deals totaled £347b (US$428b), which was 13% of the global total and an increase of 50% against 2019, although volumes did fall compared with the previous year.
UK investors were also involved in 8% of all deals announced. This is despite around two-thirds (69%) of UK executives in the survey reporting that they’d failed to complete a deal in the last 12 months, with the majority of these halted due to valuation issues. This compares to 55% reporting deal failure globally, of which 36% stalled on price. It seems that with the UK M&A market running so hot — and UK targets being in great demand among global buyers — international buyers may be outbidding some domestic acquirors, closing the valuation gap.
The UK deal market remains exceptionally active in 2021. The pace of change that drove deals to exceptionally high levels before the pandemic has accelerated, quickened by changes in behavior and attitude that companies cannot afford to ignore. The impact of digitization, geopolitical tensions and an increasing focus on purpose and sustainability will continue to reshape our world and add to this imperative for companies to act. Companies need to be continually reassessing and refocusing their portfolios to stay on the front foot. We expect the UK C-suite to remain emboldened by this environment to continue transforming their business, constantly reviewing how they secure long-term value in an ever-changing world.