80% of dealmakers eyeing opportunities in UK mid-market


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International law firm Trowers & Hamlins reports continued optimism among the M&A community for the year ahead, with 80% of dealmakers eyeing opportunities in their key markets and 65% expecting valuations to keep increasing. The projections come off the back of a new report analysing key trends in UK mid-market M&A and beyond. 

Despite well-publicised economic challenges, the past year has again showcased the strength of the investing and dealmaking communities, with the UK mid-market sustaining high levels of M&A activity well into Q4 2022.

Inflation, tightening debt markets and economic downturn may be causing a potential slowdown, but this is not expected to last long with many sectors set for another strong showing in 2023. Optimism levels remain consistent with a year ago. That optimism materialised into a record year for mid-market M&A numbers, so the 2023 outlook appears bright according to respondents made up of private equity professionals, corporate finance advisers and those in C-suite decision-making roles at corporates. 

Key findings summary: 

  • 80% of respondents see ‘some’ or ‘many’ opportunities in their key markets
  • 65% of respondents expect valuations to increase
  • 63% point to economic uncertainty as the biggest factor impacting dealmaking
  • Energy, Healthcare and TMT identified as most active sectors
  • Private equity remains a strong driver of dealflow
  • 80% expect more distressed sales in the next 12 months

As ever, buyers will place a premium on quality businesses, and private equity capital is there to be deployed accordingly, but some activity will also be driven by distressed sales, which 80% of respondents point to as a prediction for the coming year. This does not, however, translate into a willingness to conduct ‘buy as seen’ deals, with only 16% saying they would pursue such transactions. 

In terms of the sector outlook, 61% expect to see higher valuations in the Technology, Media and Telecommunications (TMT) sector, and 55% anticipate higher valuations in the Energy, Utilities and Resources (excluding Mining) sector. These two sectors also scored highest when respondents were asked to identify the sector most likely to be active for dealmaking in 2023. Financial Services and Healthcare are expected to be stable, with a majority of respondents expecting higher valuations or ‘no change’. 

Read the full M&A report from Trowers & Hamlins’ Corporate team.

Tim Nye, partner and Head of Corporate at Trowers & Hamlins, comments: 

“National and global challenges cannot be ignored, but there is every reason for optimism in UK M&A, as our research shows. We saw a similar pattern at the peak of the pandemic, which prompted a brief pause on activity, before bumper years in 2021 and through most of 2022. This time it is inflation and broader economic uncertainty which may cause a temporary slowdown, but this won’t last long and will be limited to certain sectors, only.

Speaking to the market, it is clear that there is capital and appetite in large supply, particularly among private equity firms. I’m in no doubt that dealmakers will be kept busy in 2023 as opportunities continue to present themselves.” 

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