Corporate Finance Hub

Discover the latest deals activity, news and resources on all the business issues that matter to you.

H1 2023 Deals Market Overview 

M&A activity robust in mid-market, but there are winners and losers

Deals are taking longer to complete, with investors showing more caution, but sectors such as life sciences are proving strong despite market uncertainty.

The pent-up demand from private equity in 2020 led to a booming M&A market in the subsequent years. Today though, the boom has tapered, with a climate of uncertainty caused by myriad events on the geopolitical stage.

UK capital markets have been effectively ‘closed’ to initial public offerings, but deal activity in the mid-market has been more robust. This is likely a feature of less reliance on the debt markets vs mega deals, and significant levels of private equity ‘dry-powder’, but also because competitive auctions for good assets remain strong.

The mid-market has become quite binary, however. Deals are taking longer to complete, and investors are more cautious and selective. Increasingly, investors are turning to ‘safer’ sectors such as life sciences, healthcare and technology because they tend to offer more secure revenues.

“There is more competitive tension around very good asset, but also, more investors are looking at ‘secure’ sectors that they probably haven't considered before. There is still strong demand from a life sciences point of view, but also anything linked to an underpinning of revenue, a secure cash profile, and longer term contracts.” Graeme Hurst, partner at BDO, leads our financial due diligence offering in Life Sciences.

Life sciences and technology are sectors that weathered the storm during COVID-19 and have remained robust in the post-pandemic years.

“Funds that typically had an anchor or specialism for their investment strategies have probably tilted a little bit more around healthcare, life sciences and tech,” Tom Holt, BDO partner, M&A.

Preparation and evidencing value are key

Securing a deal is always about maintaining confidence and momentum through the process. In the current unsteady deals environment, those twin goals are more important than ever. Greater preparedness ensures our clients are in the best possible position for a sale, avoiding any last-minute nasty surprises and ensuring a smoother process in an uncertain world, all of which maximises value.

We combine our sector knowledge with the application of bespoke, sophisticated data analytics tools, allowing us to provide deeper insights during the pre-planning stage as well as more detailed due diligence, evidencing the value drivers of a business.

“We're diving into more detail in specific areas such as customer revenue forecasts. We can now analyse even more data from more sources thanks to our analytics tools. We have also heightened our focus on high risk or high opportunity areas within the due diligence process,” Hurst says.

With the cost of capital rising, we are also seeing opportunities for organisations to carve out non-core assets to reduce corporate debt, which has become very expensive.

Access to capital has become trickier with the current market uncertainty. With our sector knowledge and expertise in the debt market landscape, however, we are the right advisors to be able to guide you through the options available.

Looking ahead

Some indicators suggest that over the final two quarters of 2023 we will see a rise in deal activity. There is an uptick in the number of data rooms being set up, hinting at the readiness of investors and companies to move forward with future deals, albeit upward pressures on interest rates remain an unhelpful headwind.

Despite the current uncertainty, private equity investors continue to deploy capital, and while capital markets remain largely closed, the outlook for the mid-market is looking brighter. Fast forward six months to a year from now and there will have to be an adjustment, even if that includes learning to live with high inflation.

“There comes a point where you live with uncertainty for so long, that even that becomes normal. You just adjust. I think we're at a point now where the market is adjusting to the fact that there is a war on the edge of Europe and there are high levels of inflation,” says Derek Neil, BDO partner, Transaction Services.

From a life sciences perspective, the outlook is even more positive. Our past successes working with organisations of all sizes proves that securing the right deal isn’t about large teams, but rather effective application of the right people.

Critically, our work is increasingly conducted through the lens of Environmental, Social and Governance (ESG). We have been developing our ESG credentials across our due diligence and M&A teams. Our focus on risk from an ESG perspective means our teams can identify operations that have a genuine sustainability claim, and those that don’t.

We see the impact of ESG reporting in the capital markets and IPOs. That focus is filtering into mid-market M&A, where investors are wishing to understand the ESG risks.

Similarly, the capability of artificial intelligence is accelerating daily, and although much is still unknown about how significantly AI will change the way we live and work, we acknowledge how profound a change it will be.

“Every private equity investment committee or potential investor will be asking themselves the question, ‘How could AI disrupt this business?’ And I don't think they know the full answer yet. AI will change things more than we realise but it'll probably take a bit longer than we expect,” Neil says.

With this expectation, an awareness of the twin impacts of AI and ESG permeate all our activity across sectors.

Through our propositions we guide clients through a journey powered by critical insights, applying leading technology to enhance these. Irrespective of the drivers for change in your organisation, we will ensure confidence and momentum to secure the deal your company needs. 

Our Key Deal Highlights For H1 2023

  • Completed 73 deals across multiple sectors in H1 2023
  • With a combined deal value of £3.2billion
  • Most active sectors remain technology, media & telecoms (TMT), financial services and life sciences
  • While UK capital markets have been quiet, M&A activity in the mid-market has been more robust
  • Deals are taking longer to complete with investors being more cautious and favouring the ‘safer’ sectors

Get the latest updates straight to your inbox

Deal Matrix

Browse our most active sectors in our deal matrix and see a selection of our deals, by selecting a sector tile, for more information.

It has been encouraging to see the M&A market perform ahead of where most 2022 predictions forecast. However, with continued inflationary challenges, interest rate hikes and concerns over the geopolitical environment, there is still a fair amount of caution. Much of the M&A activity in this quarter has either been because of accelerated M&A or well-planned with high-quality assets being traded.

Our most notable sectors, by volume, reflect the wider UK market with Technology, Media & Telecoms (TMT), Financial Services (FS), Consumer, Retail & Leisure (CRL) and Life sciences, Pharma & Biotech (LPB) leading the way. Notably, however, our deals for Transport & Logistics bucked the general market trend to deliver an increase in volumes against 2022.

Partners for these sectors provide a snapshot of their respective sectors in Q1-23 and insights into what we can expect to see over the next three to six months.


Technology, Media & Telecoms – Derek Neil and Gordon Carstairs

We completed over £200m (disclosed value) of TMT deals in Q1 2023, and the pipeline for Q2 and Q3 is looking positive. The long-term growth drivers for the sector remain favourable so while investors are being rightly cautious given ongoing uncertainty, really well-prepared companies can do well. Organic growth, the ability to pass price rises on to customers, churn and working capital trends are all areas of focus in due diligence, but assuming these tests are passed, creative structuring can help to bridge price expectation gaps.

Tech investors and corporate acquirers continue to look to supplement slower organic growth with an inorganic strategy. 
We expect the coming twelve months to be dominated by technologies that drive efficiencies through automation and the effective use of data. Significantly, these investments and initiatives will enhance business resilience and drive better cash generation.

Transport, Shipping & Logistics - Marty Lau and Jason Whitworth 

The current macroeconomic conditions and post-pandemic adjustments continue to create challenges as well as opportunities for the industry. The need for consolidation to create economies of scale and to expand service offering are driving deal activity in the sector. There is interest from domestic and international private equity, both in acquiring Logistics assets and in funding consolidation growth plans. The increasing global emphasis on ESG is also shaping the M&A strategies of transport and Logistics companies. 

We completed four transport, shipping and logistics transactions in Q1 2023 at an aggregated, disclosed value of £215m. 
Deal activity in the logistics sector had a slow start in 2023. A sharp fall from 2022 levels in deal volume and, more significantly, in disclosed value in Q1 reflect the changing economic dynamics since the start of the year.

Appetite from buyers and investors appears to remain high. However, uncertainty, particularly over the delivery of future earnings, is damaging confidence. A reluctance to commit to value has made completing deals more challenging than usual. Looking forward, we do not believe the appetite from buyers and investors will change. However, a boost in confidence is needed, which should come from an expected reduction in inflation and a more stable economic environment. Following this, we predict a relatively quick pick-up in activity as the year progresses.

Leisure, Retail & Consumer - Jo Davenport and Laura McNaughton 

We completed £380m (disclosed value) of Leisure, Retail and Consumer deals in Q1 2023, and the pipeline going into H2 2023 is looking positive. Market uncertainty and inflationary pressures mean investors are still cautious. Nonetheless, we are seeing companies preparing for transactions when the market is more positive.

The landscape across Consumer deals has been mixed for a number of years due to various economic factors. However, consumer brands are continuing to show resilience and determination. We hope that a more stable economic landscape will underpin building momentum in consumer brand M&A. Equally, those businesses that have not responded to consumer changing demands will drive an uptick in accelerated M&A where there is a highly liquid and engaged buyer landscape.

Market uncertainty has caused private equity investors to pause and take stock and they have been quiet over the last 12 months. With optimism and stability on the horizon, we expect to see the appetite to deploy capital return.

So overall, an optimistic outlook with strong indicators or a buoyant M&A market for consumer over the next 12-18 months.

Financial Services – Rahoel Patel and Duncan Chandler

Financial Services deal activity remained resilient in Q1 2023 with continued PE-backed consolidation alongside strategic corporate plays. While market sentiment is still generally cautious due to stubbornly high levels of inflation and continued monetary policy tightening, the general mood music is improving and there were positive signs with respect to businesses preparing for a transaction.

The outlook for the short-term remains decent, with macro indicators gradually turning more positive. The wall of cash, allied with a number of secular drivers, have remained broadly intact during the past 12 months. The deal process is now more prolonged and thoughtful but the market is still very much alive.

2022 was a year in which we saw most of the world move out of COVID-19 restrictions only to be impacted by Russia’s war in Ukraine, rising energy costs, further supply chain concerns and inflation.

BDO deals volumes, while reflecting the global decrease in transactional activity, were consistent with the EMEA deals environment, which performed surprisingly well considering the European macro-economic conditions. Our Corporate Finance team completed 362 deals in 2022 of which 54% were cross border. Our private equity related deals remained largely unchanged against 2021 at just over 67% of our completions.

Our robust deal activity, both within the UK and globally, has seen BDO achieve No1 status for deals by volume, on accounting and advisory rankings such as Mergermarket, Experian and FactSet. This is a testament to our team’s dedication and commitment, and the resilience of the entrepreneurial and mid-market clients we work with.

BDO’s Corporate Finance team has also been shortlisted for the Private Equity Real Deals Awards in the categories of UK Corporate Finance House of the Year and Commercial Due Diligence Provider of the Year. Read more about our deals for 2022 following our key highlights below. You can browse our deals by most active sector and hear from our sector partners.

Key Highlights

  • 362 deals with a total deal value of £31.2bn
  • 67% of all our deals involve Private Equity (PE)
  • 54% were cross-border transactions
  • Most active sector (volume) remains TMT
  • Biggest sector increase (volume) was financial

Technology and Media

Consistent with the global and EMEA deals market, BDO’s technology, media and telecoms (TMT) sector, while seeing a reduction in deal volumes (overall and for private equity), remained the most active sector, accounting for 14% of our overall deals in 2022, TMT’s deal value was £2.4bn.

While this market remains busy, it has seen changes which are set to continue. According to Gordon Carstairs, M&A partner and technology sector specialist, "Last year saw the first signs of slower growth in the tech sector impacted by the changing economic climate. We expect the coming twelve months to be highlighted by technologies that drive efficiencies and enhance business resilience."

Similarly, Derek Neil, Transaction Services partner and tech specialist comments, "TMT continues to be a PE favourite, with both new investments and bolt-ons, and valuations have been robust, with vendor due diligence supporting the majority of M&A processes. In tech, we have seen activity in software, IT managed services and IT consulting. The tech end of media has also been active, as has telecom infrastructure."

Financial Services

Our financial services sector saw a 33% year-on-year increase in deals by volume and 34% increase in deal value or £1.8bn. Financial services (FS) accounted for 9% of our overall deal volume in 2022.

Rahoel Patel, Transaction Services partner and FS sector specialist says, “Financial Services deal activity remains resilient, driven in part by consolidation and the need to buy-in capability and expertise, albeit mega-deal making has suffered due to geo-political tensions and macro-economic volatility”. 

While Duncan Chandler, FS sector partner specialising in M&A adds, “For 2023, as markets continue to stabilise, expect the outlook for FS deal activity to remain positive, as consolidation continues alongside the gradual shakeout of fintech survivors and opportunistic buys by the larger FS incumbents.”

Real Estate and REITS

While EMEA real estate deal activity remained fairly constant in 2022 (Mergermarkets), BDO’s real estate team saw a 10% increase in deal volume. With 41 deals accounting for £6.7bn in value, this is a 38% increase on 2021’s deal value.

Simon Hall, Transaction Services partner and real estate sector specialist says, “Real estate M&A was active throughout 2022 but paused for breath post mini budget, sparked by uncertainty over valuations, inflation, interest rates and debt availability. While investors remain cautious, we have optimism for the rest of 2023, as investors tell us there is liquidity and demand for deals once there is more visibility over valuations and the wider macroeconomic outlook.”

Retail, Leisure and Consumer

In other sectors, we noted that while retail, leisure and consumer activity remained largely unchanged in deal volume (34 deals), there was a decrease in deal value compared to 2021. Jo Davenport, partner specialising in Capital Markets says, “The cost-of-living crisis means it is a difficult time to transact in the consumer sector, but we are seeing an underlying appetite from business owners wanting to sell. Once valuation expectations are harmonised and transactional levels return, buyers will need to increase the level of diligence focused on underlying earnings and interpreting how the macroeconomic volatility has impacted the financials".

Distressed M&A

Amar Patel, Special Situations M&A leader, comments on the distressed market, “In 2022, there was not the level of distressed M&A that might perhaps have been expected given the macro-economic environment.  UK businesses have been greatly assisted by funders, and Government fiscal and legal support.  As is well-documented, there is significant capital circulating in the market to support businesses.  Looking forward, however, there remains significant appetite for investment in distressed assets.  Distressed/special situations funds have raised significant money which needs deploying.  We also expect companies who took on additional loans during the pandemic era to face some level of difficulty in the near- to medium-term.  2023 has already seen an up-tick in activity in certain sectors and we anticipate further activity as assets are re-assessed.”