M&A competition fuelled by lower volumes in Q2

Domestic deal values reached £10.6bn in Q2 up from £4.5bn in Q1 and exceeded the deal values in Q4 (£9.1m)

M&A competition has reportedly been fuelled by higher values and lower volumes, as deal values increased across all inward, domestic and outward deals in Q2, whilst deal volumes dropped following elevated activity in Q1.

A new report from the Office of National Statistics found that the increase in M&A deal values marked the fourth consecutive quarterly increase and the highest levels since the Covid-19 pandemic hit. 

In addition, domestic deal values reached £10.6bn in Q2 up from £4.5bn in Q1 and exceeded the deal values in Q4 (£9.1m). Outward M&A values climbed to the highest level (£6bn) since Q3 2019.

In total, there were 131 completed deals in June 2021, down from a high of 246 in March 2021. Domestic and inward transactions saw increases in activity through Q2 and outward deals remained relatively flat again this quarter.

Kirsty Sandwell, head of corporate finance at RSM, said: “The value for all deals, domestic, inward and outward, increased through Q2; however, volumes fell which is hardly surprising due to record levels of transactions at the end of 2020 and the start of this year. This spike was mainly due to catch up following the pandemic, the threat of capital gains tax increases and liquidity in the market.

“The pandemic and factors such as government support have almost created a ‘bubble’ where low insolvency rates, high levels of available cash and lower deal volumes are creating a very competitive market which is pushing deal prices up.”

She added: “As we emerge post-pandemic this upward trajectory looks set to continue until normal levels of business distress return and levels of investment ease as confidence in the market rebalances to a ‘new normal.”

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