Global Acquirer Trends, H1 2024

Key trends

• The number of H1 2024 transactions in the UK&I grew over 5% in the first half of the year compared to the same period in 2023.

• H1 2024 saw the Consumer sector recover materially from last year with transaction numbers up 11% globally.

• The global M&A picture in H1 2024 has been much more mixed with a significant decline in North American (-59%) domestic deal volumes (and indeed total deals) contrasting with flat total deal numbers in APAC (0%) and very solid, if unexceptional growth in total deals across the UK&I (+5%), Continental Europe and Nordics (+6%).

Overview

With the outcome of this Summer’s UK general election flagged well in advance of voters going to the polls, the data provides very little evidence of the election cycle having had a negative impact on deal volumes in UK&I in the first six months of 2024.

Indeed, the number of transactions grew over 5% in the first half of the year compared to the same period in 2023. It was, however, domestic deal activity that drove this, with a 16% increase in UK&I transactions more than offsetting a modest decline in inward investments from abroad. The new Labour government has already indicated a strong desire to court more foreign investment into the UK as part of its growth-focused agenda and hopefully we will see some benefits from this within our analysis in coming periods.

Having held up well in 2023, the UK did see a drop-off in inbound investment from the APAC region in particular and, perhaps more surprisingly, from North America.  The reduction in investment volume from the Asia Pacific region is likely to be in some part related to the significant increase in national security related restrictions on FDI in Western Europe and the UK in particular. The UK’s National Security & Investment Act has become a much greater component of the investment evaluation process for foreign parties as the enhanced risk of UK Government intervention is clearly unattractive for buyers coming from outside of Western Europe and north America. Similarly, the risk of an acquirer or investor ultimately not being deemed acceptable is increasingly dissuading sellers of UK assets from even speaking to parties from geographies - or with capital derived from geographies - that may be viewed negatively.

The reduction in inbound investment from North America is less expected but perhaps not entirely surprising given the USA is deep into its own presidential election cycle with the outcome much less certain than in the UK and a demonstrable dichotomy in the stance of the candidates as regards foreign investment and foreign relations more broadly.  Very notably, North American domestic deal volumes are actually down 59% - far more than the drop-off in investments into the UK&I (-12%).

Overall, the most significant story for the UK&I has been the strong recovery in domestic deal volumes. Several market factors have contributed to this including a more stable interest rate environment driven by the partial-normalisation of inflation, the significant re-opening of debt markets for both corporate sponsors and private equity, and a spirited UK stock market performance, with the FTSE 100 closing out June almost 6% up on the start of the year and 8.5% up on the same date the prior year. Other M&A specific trends such as the increasing pressure on private equity GP’s to exit investments and return funds to LP’s in order to be able to raise the next fund, and company- or sector-specific factors such as the easing of energy prices and the slow but ongoing normalisation of manufacturing supply chains have also contributed.

The global M&A picture in H1 2024 has been much more mixed with the significant decline in North American (-59%) domestic deal volumes (and indeed total deals) contrasting with flat total deal numbers in APAC (0%) and very solid, if unexceptional growth in total deals across the UK&I (+5%), Continental Europe (excl. Nordics, +7%) and Nordics (+6%). Again, across all European markets the main growth driver was actually ‘domestic’ deal volumes within those markets. Across the Rest of World region (mainly comprised of Africa and South America), deal volumes were down 13% but this must be viewed in the context of a record first half in deal volumes last year.

Turning to the industry sector analysis of the data, we can see that the biggest winner in global transaction volumes has been the Consumer market, which has recovered materially from its problems – notably the cost of living crisis -  last year with transaction numbers up 11%.  This growth interestingly has all come from UK&I, Europe and Asia Pacific with North American consumer volumes flat year-on-year. At the other end of the spectrum, the biggest relative decline in deal numbers globally was suffered by the Industrials sector, down 10%. The UK&I was a major outlier here as Industrials deal volumes here actually increased 10%.

The other big regional sector trend of note is the substantial increase in the number of Media & Technology investments within the APAC region (+20%) at a time when all other regions (-7%) and North America in particular (-7%) both went into reverse. While many factors may have impacted this, it is likely that that US import restrictions have significantly closed its technology markets to China, both as a US tech customer and as a supplier, and China has increasingly focused its efforts on growing domestic and regional markets and supply chains to ensure certainty of supply. This could also simply be a sign of the continued rebalancing of the IP scales across TMT between the USA and China, with the Chinese investing heavily in target industries where there is both a large domestic market and a realistic chance of becoming the global leader, such as electric vehicles.

Summary

Overall, the UK&I has performed strongly in the first half of 2024 against a very mixed global backcloth and, despite the ongoing conflicts in Ukraine and Israel and the wider geopolitical concerns around the South China Sea, we believe that the factors supporting this are going to remain in place for the immediate future, providing a solid platform for increasing M&A activity into 2025.

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