EY comments on UK M&A activity for Q2 2023 published by the ONS

Silvia Rindone, UK&I Managing Partner for Strategy and Transactions at EY comments:

“M&A activity in the UK remained subdued in the second quarter of 2023 as companies continued to contend with low-growth, high-inflation and rising interest rates. However, deals involving UK companies did accelerate after a very slow first quarter, pointing to further strengthening through 2023 and into 2024.

“In total, 450 cross-border and domestic M&A deals completed during Q2, down year-on-year from 526 deals completed in Q2 2023.

“Despite economic headwinds, the latest research from EY shows that M&A activity remains a strategic priority for UK CEOs particularly when it comes to technology innovation. The latest EY CEO Outlook Pulse survey found that nearly all (98%) UK CEOs said they expect to actively pursue a strategic transaction in the next 12 months, with 63% looking to M&A, 59% looking to divest and 69% looking to enter strategic alliances or joint ventures.

“With new technologies emerging and maturing rapidly, we’re likely to see an acceleration in investment in digital assets – such as AI capabilities – leading to more transactions as companies look to either reinforce their market position or gain a competitive advantage. According to EY research, 58% of UK CEOs are planning to make significant capital investments in the next 12 months, whilst 35% have already fully-integrated AI-driven product/service changes into their capital allocation process.

“Looking ahead, the fundamental deal drivers that supported the M&A market over the past few years remain intact and we expect private capital, which been resilient through many previous economic cycles, to lead the recovery followed by corporates. As the deals market picks up, we expect to see increasing interest in acquiring UK assets, particularly those in the life sciences and technology sectors, given the UK’s reputation in Europe as a leading destination for AI start-ups.”