UK Trends and Developments Contributed by: Ronnie Preiskel, Karthyaeni Vittala, Daniel Preiskel and Paul Stelges, Preiskel & Co
pricing gaps. Earn-outs have become more sophisticated, now measuring not only financial outcomes to support return on investment but also validating broader assumptions that under- pin the investment case and benefit the wider buyer group. These benefits may include cost savings, product development and staff reten- tion. Despite the integration challenges posed by earn-outs, deferred consideration pricing models are extending over longer periods and making up a larger portion of the enterprise value. Environmental, social and governance (ESG) factors have also become more prominent, as investors are increasingly using ESG criteria to make decisions. Companies with strong ESG foundations are more favourable, and are more frequently seen as sustainable and less risky, making them more attractive to investors. The authors have seen an increasing number of war- ranties framed around ESG, as acquirers place more emphasis on compliance with ESG targets. Protracted Deal Timeframes M&A deals are taking notably longer to complete than in the past, which coincides with a more risk-averse investor pool and with a more cau- tious approach to risk management being taken by acquirers in the current market, involving increased emphasis on earn-outs and deferred payment. Heightened regulatory scrutiny has also increased execution risk and deal timelines. Notwithstanding that we are experiencing a buy- er’s market, many acquirers have shown little to no urgency in completing deals. Many acquirers have been spending more time “kicking tyres”, with one eye on the developing macroeconomic situation.
The authors would hope to see more deals mov- ing through to completion following greater clar- ity in the political and economic climate. AI and Technology in M&A Since the introduction of ChatGPT, AI-driven processes have become a highly sought-after resource and have been likened to the advent of the modern internet 30 years ago. AI and AI- driven processes are still in their infancy and continue to show teething problems, such as bias, security issues and inaccurate input. How- ever, the growth potential for AI is unrivalled. It is a rapidly growing field with applications across various industries, from healthcare to finance and entertainment. Companies that success- fully leverage AI will see significant growth in the coming years. The M&A process has seen the integration and application of AI; whether acquiring or being acquired, the use of AI will increase efficiency and lower cost. For the acquirer, the digitalisa- tion of the M&A process itself has significantly impacted on deal speed, enhancing the due dili- gence process and reducing overall transaction cost. For the acquired, increased digitalisation aids value creation, provides for smoother tran- sition and minimises technology-related risks (such as cybersecurity) in the integration phases. The Dominance of Private Equity Private equity (PE) sitting on record levels of uncapitalised investment continues to be a major driver in M&A. PE houses often favour TMT and industrial manufacturing, which are among the most active sectors for PE deals. These sectors are attracting significant investment due to their growth potential and strategic importance. The general decline in M&A “mega-deals” has led to PE firms more frequently participating in
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