Mergers and acquisition activity in the UK is predicted to witness an upswing over the next year, industry insiders expect, though they also believe that any recovery will be slow.
Fresh optimism emerged in the latest survey from management consultancy CIL's seventh annual survey, where 84% of respondents deemed current deal activity as "low", compared to only 35% holding this opinion a year ago.
“None of our respondents think deal activity could get any worse – we’ve hit rock bottom," said Alex Marshall, senior partner at CIL.
After declining in 2022, M&A activity fell further in 2023, other wider data from the likes of Dealogic has shown earlier this year.
Rising financing costs, inflation and a drop in valuations that "made negotiations between sellers and buyers tougher" were all cited by the CIL report.
One key finding from the index, gathered insights from 143 UK market stakeholders, is that there has been a shift from a seller's to a buyer's market, a trend that was apparent the year before.
Around 52% of participants now deem it to be a buyer's market, an increase from 37% in the prior year.
“Investors consider it to be a buyer’s market: higher costs of capital, tighter credit conditions and macro-economic uncertainties are combining to reduce competition for assets,” said Marshall.
While M&A activity is anticipated to improve, it is expected to be gradual, with 72% of the industry predicting a moderate increment and only around 6% currently forecasting a significant surge.
The annual index also indicates that 66% of dealmakers view current investment assets as average in quality, though 48% foresee improvements in asset quality in the coming year.
In the summer, global M&A activity in the second quarter was found to be down 36% year on year but higher than the first three months of the year, according to data from Dealogic.
Last week, it appeared that global activity plateaued in the third quarter, as a rebound in volumes in the US offset declines in Europe and Asia-Pacific.
M&A fell 2.8% year on year during the quarter to the end of September, according to Dealogic's data, and was down 2% compared to the June quarter.