What did the last report tell us?

While the South East was the most active region outside of London for high-growth M&A, deal activity was lower in 2023, when compared to 2022, largely due to macro-economic factors. The hope and expectation for 2024 was that there would be an increase in M&A activity.

Where are we now?

In Q1 2024, there were 52 M&A transactions in the South East involving high growth companies, compared to 48 in Q1 2023. We had hoped to see a greater uptick in deals, particularly as there were 68 in Q4 of 2023. However, despite this not yet coming to fruition, optimism remains, with the general feeling being that it will take a little longer than anticipated for activity to pick up meaningfully. Global conflicts and key elections in the UK and US are prompting a more cautionary outlook until we have some clarity and certainty (or at least “temporary” clarity and certainty) on what the world could look like in the coming 4-5 years. Stability breeds confidence, which fuels M&A activity.

Macro-economic factors are beyond the control of transacting parties, but company valuations are not. The valuation tension is still present. The good news is that parties want to transact, but valuation discussions are resulting in a good number of deals taking much longer to execute. Commentary in the market suggests that trade deals have resulted in lower valuations when compared to last year with private equity deal valuations still holding up, but even private equity deals are coming under pressure to reflect the current market sentiment. The next six months will be interesting but “psychologically”, the fact we are now officially out of recession is good news.