Steve Ivermee, UKI Strategy and Transactions Leader at EY comments:
“The final quarter of 2022 saw subdued levels of M&A activity, with 483 inward, outward and domestic M&A deals completed during Q4, down from Q4 2021 when 570 deals completed in total.
“Uncertainty about valuation, higher interest rates and the geopolitical landscape continue to present significant challenges for M&A in 2023. Globally, January saw the slowest start to a year since 2003 and this slowdown is likely to continue until investors have greater confidence in the outlook for inflation and interest rates.
“Looking ahead, we are likely to see smaller, more targeted deals in sectors which play to the UK’s strengths including technology, energy and life sciences, with digital transformation, portfolio rebalancing and ESG issues the key deal drivers.
“CEOs have indicated that dealmaking may improve later in the year. In EY’s latest CEO Outlook, 50% of UK CEOs say they are planning to make acquisitions in the next 12 months whilst 67% are considering joint ventures. Although no doubt businesses will be keeping a close eye on the wider economy and market conditions to inform their plans.
“Private equity (PE), a major driver behind M&A activity over the last three years, has slowed investments; however private capital has been resilient through many previous economic cycles and we expect the same in 2023, with PE leading the recovery followed by corporates.”