UK Trends and Developments Contributed by: Ronnie Preiskel, Karthyaeni Vittala, Daniel Preiskel and Paul Stelges, Preiskel & Co
mergers, acquisitions, joint ventures and minor- ity shareholdings within the lower-middle mar- ket. This shift is largely due to the high cost of capital and the preference for more manageable investments. With traditional bank-lending slowing down, PE has become a vital source of capital for corpo- rates, and continues to spur the M&A market. However, whispers of tighter regulatory over- sight and uncertainty under the new government means that PE firms will need to keep abreast of, and navigate, potential hurdles if they are to maintain dominance in the M&A market. In 2024, the slowdown in PE exits indicates that fund managers are focusing more on qual- ity than on quantity when selling. Despite chal- lenging market conditions, they have managed to secure healthy valuations. Consequently, PE firms are now placing more emphasis on value creation and are seeking further organic growth opportunities following previous rounds of PE ownership. However, PE funds continue to sit on record levels of aging “dry powder”, which has been horded over the past number of years. PE funds will begin to come under fire from investors to invest, raise further funds and create liquidity. Ultimately, the uncertainty in the market means that PE funds have been on the fence with regards to capital deployment. With an optimistic eye on the future, PE firms may be seen rushing to deploy their dry powder and to diversify portfolios, before any potential
labour cost – will undoubtedly negatively impact on many businesses. The worldwide impact of US elections and global conflicts are also influ- ential factors. Despite this, global TMT deal kick-offs jumped 15% in the last six months, prompted by the generative-AI hype, steadying inflation rates, and pent-up supply and demand – this accord- ing to virtual data room provider Datasite, which claims to have seen a 12% uptick in TMT deals year on year. The UK ranks fourth in the top five regions by total sell-side kick-offs between July 2023 and August 2024, behind only the USA (West and South) and Germany. Datasite records that, on average, the EMEA region saw an increase of 10% in potential sell- ers in 2024, with average deal closure down by 1% generally and down by 11% in relation to mid-market deal closes. This is likely a sign that investors are “kicking the can down the road” until they begin to see evidence of more favour- able market conditions. Stability will always be key to the open market, and not least in M&A transactions. Looking forward, many investors, PE houses and corporates who made acquisitions at the height of the cycle in 2021 will be looking for a return on investment and liquidity moving into 2025, having seen out their third financial year. In turn, some may look to the improving M&A market for secondary sales, bolt-on acquisitions and divesture as they seek to consolidate. The authors are hopeful that the mounting pressure on PE funds to deploy their dry powder will spark the next bull run for M&A markets. Outlook for 2025 Ultimately, the driving force behind transactions is stability. Investors, PE funds and corporates
regulations begin to show teeth. Economic Situation in the UK
The recent change of government and the Autumn Budget – not to mention the increased
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