Steve Ivermee, UKI Strategy and Transactions Leader at EY, comments on UK M&A activity for January – March 2022, published by the ONS:
“UK M&A activity in the first quarter of the year dipped from the peaks witnessed in 2021 but has returned to pre-pandemic levels as evidenced by the latest ONS M&A figures.
“Increasing headwinds, including the economic impact of the war in Ukraine and inflationary pressures, have dampened activity levels, but M&A has remained robust with £17.8bn worth of UK deals transacted in Q1 2022. Relatively few deals stalled due to the ongoing geopolitical tensions, demonstrating that many businesses can navigate uncertainty in the post-pandemic world.
“In total, 371 inward, outward and domestic M&A deals completed during Q1 2022, a decrease of 199 in comparison to Q4 2021. Inward M&A activity reached £11.2bn, a notable £5.1bn lower than Q4 2021, while domestic M&A reached £4.0bn, down £0.2bn from the previous quarter.
“The UK remains a hotbed for cross-border M&A activity, particularly in sectors it has strengths in, including utilities, renewables, logistics, pharmaceuticals and life sciences, all of which witnessed increased activity levels from overseas buyers in Q1 2022. The sentiment echoes the findings of the latest EY 2022 UK Attractiveness Survey which found that the UK continues to be recognised as a leading destination for inward investment in Europe.
“We expect steady levels of dealmaking to continue for the rest of the year, with many companies using M&A as the most effective route to respond to the myriad of challenges and opportunities they are facing, including the sustainability agenda.
“However, although the strategic drivers behind the deals boom in 2021 remain intact, the impact of inflation has meant the cost of capital has increased. We’re now seeing an uptick in private credit for private equity deals which are less exposed to public markets and looking to deploy significant amounts of dry powder – a trend we expect to continue in the year ahead.”