The M&A market in 2022 remained resilient despite unprecedented monetary policy action, geopolitical turmoil and sky-high inflation. Whilst M&A activity may be flattening out, it is by no means declining and is expected to continue slow and steady growth through 2023. We take a look at the key trends for the year ahead.
Energy & infrastructure sector
With windfall profits from the record energy prices of the past winter, energy and infrastructure firms are expected to look to invest billions into not only current energy infrastructure but also into sustainable and renewable sources of energy. Smaller, specialist firms in the green-energy space are likely to pull high valuations from legacy energy firms as they look to diversify their portfolio.
The grand opening of Saudi Arabia to the world over the past year adds them to the list of Middle Eastern countries looking to acquire and invest in established British and European businesses. The United Arab Emirates, Qatar, Oman and Bahrain have already been heavily active in the UK M&A market both, through private entities and their sovereign wealth funds.
Rising interest rates and rampant inflation is leading to a survival-of-the-fittest situation in multiple UK sectors. Many once profitable firms are now heavily loss-making, and the few profitable firms left in these industries are looking to snap up the loss-making firms at below-par valuations in an effort to acquire their customer bases. Nevertheless, increased political and financial market stability should bring confidence back into the UK M&A market. The government’s latest Brexit pledges could also attract further investment into UK businesses.
In the present economic climate, the bottom line is more important than ever for firms in competition. Technology has often been the answer when firms have looked to cut costs, improve efficiencies and gain a competitive advantage. We are likely to see large and medium sized companies from a variety of sectors acquire niche technological solutions companies and internalise them to purely focus on solutions bespoke to the needs of the acquiring company.