Shared Insight: The M&A Landscape in 2023

Shared Insight: The M&A Landscape in 2023

Experian has recently released its Market IQ Report and while the challenges faced by the M&A market for most of the year are unchanging, Wales's M&A market has contributed considerably to the UK M&A landscape, while some industries in Southwest England saw higher valuations than the previous reporting period.

As we approach the end of 2023, we will be analysing the Market IQ Report and what it tells us about UK deal activity between Q1 and Q3, particularly in the Wales and Southwest regions.

Shared Insight: The M&A Landscape in 2023

Deal Activity in Wales 2023

Despite the challenging economic conditions that the UK is experiencing, Wales was the only region to annually return a growth in transaction volume. The report found that there was a Welsh element in approximately 4% of all UK transactions by volume so far this year

199 deals were completed in Wales this year, increasing an impressive 6% from the 187 transactions that were recorded in the first 9 months of 2022. While these numbers are promising, deal value over the same period fell by 62%, from £1.3 billion to £490 million.

Manufacturing and professional services remain the dominant sectors in the Welsh deal landscape, with manufacturing also being the most valuable. Deals in this sector reached an aggregate of £308 million, increasing from £127 million in 2022.

Wales's lively technology sector continues to grow, with 43 deals being completed in the sector (this is up from 33). Deal value in this sector reached £68 million, an increase from last year's deal value of £32 million.

Across several of the most active sectors in Wales there was positive year-on-year growth. Construction deals increased by 22%, financial services by 19%, while wholesale and retail deals increased by 7%.

But some quieter sectors such as hospitality, waste management, transport, creative industries, and mining and quarrying also saw significant deal activity.

Across the board, acquisitions and development capital continue to be the most popular transaction type in Wales.

Shared Insight: The M&A Landscape in 2023

Deal Activity in the Southwest 2023

Although the Southwest experienced a 20% increase in deal volume between Q1 and Q2, activity in Q3 decreased to a level not seen in over a decade. A total of 88 transactions were reported between June and September, with the total volume of deals currently at 340.

Meanwhile, 572 deals were reported during the same period in 2022, meaning the overall year-on-year position is at a 41% decline. Deal values also fell by just below 40% to £2.4 billion for the year to date. In the same period last year, values were just below £4 billion.

All value segments underperformed, falling short of the record-breaking figures of 2021 (in Q1 of 2021 deal values in the Southwest were an incredible £21 billion), while volumes recorded a high of 241.

Larger, complicated deals that are likely to come under more scrutiny from regulators and that attract more cautious lenders continue to be the value ranges experiencing the most challenges. Meanwhile, smaller deals were more resilient to market conditions.

Acquisitions dominated deal activity, making up 66% of the region's deals, albeit at a more subdued level than the region has experienced over the last few years.

The most active sector for deal activity in the Southwest was professional services, overtaking manufacturing. A total of 95 deals worth £535 million were completed in the professional services sector in 2023, down from 228 deals in the previous year. Although fewer deals were completed in this sector in 2023, the value of these deals did increase, rising from £2.7 million in 2022 to £5.6 million this year.

The volume of manufacturing deals this year remained steady, only dropping from 100 recorded deals in 2022 to 92 deals this year. However, the value in this sector experienced a more dramatic change, falling from £1.3 billion to just £218 million; an 80% decrease.

Shared Insight: The M&A Landscape in 2023

The technology sector was the Southwest's second most valuable sector, experiencing a surge of 23% in deal values. Education, transport, and utilities experienced a boost in deal activity too, while construction, hospitality and real estate delivered higher valuations than seen in the previous reporting period.

Growth by acquisition is set to remain an important strategy for businesses, so the final quarter of 2023 could see one last increase in deal volume before the year ends. Market conditions stabilising, and adaptability and resilience demonstrated by the market recently bodes well for a return to growth in Q4 and the beginning of 2024.

Advising on 23 deals this year, GS Verde Group has once again topped Wales's legal and financial adviser activity tables in Experian's Market IQ report, the only firm to appear in both. This impressive statistic illustrates the appetite for - and the efficacy of - the Group's unique multidiscipline approach to corporate transactions and dealmaking, as well as solidifies the Group as a significant player in the UK's M&A landscape.

GS Verde Group's multidiscipline team of deal-making experts with wide-ranging sector experience, play a significant role in the success of the Group and ensure that we can provide the most optimal outcomes for businesses.

Experian Market IQ Report 2023