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The volume of mergers and acquisitions in the UK continued to decline in Q3 of this year with 362 transactions involving a change in majority share ownership, a decrease from 479 the previous quarter.
Despite this, accountancy firm RSM believes that there could be an uptick in M&A activity as a result of the impending general election next year.
The firm believes that this could push companies to get deals over the line to avoid any potential changes to capital gains tax from a new government.
A general election must be held no later than January 2025 and the Labour Party currently has a 20 point lead in most polling data.
The value of domestic M&A was £2.6bn in Q3 2023, £0.2bn lower than the previous quarter, but £0.1bn higher than Q3 2022.
Furthermore, the value of inward M&A in Q3 2023 was £5.4bn, £0.7bn higher than the previous quarter, but significantly lower than the £22.4bn seen in Q3 2022 .
The total value of outward M&A in Q3 2023 was £2.2bn, £0.2bn higher than in Q2 2023 but £6.1bn lower than Q3 2022.
James Wild, partner and head of M&A at RSM UK, said: “While today’s figures show a decline in deal volumes, transactions are happening and there are deals to be made, but they are taking longer to get over the finish line.
“Economic uncertainty is driving buyer caution and so the process requires more evidence that the business is performing. As a result, the market is polarised – there’s no shortage of interest for high quality businesses with good management, but less robust businesses are facing greater scrutiny.”
“Whilst headwinds remain, economic indicators appear to be stabilising with inflation easing and interest rates peaking, which could stimulate deal activity as investors and buyers move forward with greater confidence in 2024. This, combined with the looming threat of a change in government and potential tax changes, means sellers will be keen to push ahead with exits, but could cause buyers to be more cautious.
“We have already started seeing an increase in new potential sale mandates as sellers explore their options, potentially prompted by the upcoming general election. We expect transaction numbers to return to pre-pandemic levels towards the second half of next year.”
