Report

The key drivers for M&A in 2020

Andy Morgan Andy Morgan

Welcome to the 2020 edition of Leading the way, where we assess some of the key drivers for M&A (mergers and acquisitions) activity and how we believe the market will develop in the coming year.

We have been very busy over the last 12 months and are extremely proud to be ranked as the most active financial adviser in the UK by Experian MarketIQ.

The M&A market has faced multiple headwinds during 2019. Global trade wars, sluggish economic growth and the ubiquitous political and Brexit uncertainty have taken a toll, but the market has remained remarkably resilient. UK deal volumes have been down 5-10%, but valuations remain strong.

The key drivers for M&A in 2020 – our outlook on the M&A market

What can we expect from M&A in 2020?

We see four key themes that are likely to drive activity:

1 Corporate carve outs

Boards and shareholders are taking a far more granular look at what is really at the core of their business, the areas absorbing management focus and what is critical to driving returns on capital. This will generate transaction opportunities as non-core divestments come to the fore.

2 Private equity and debt funds continue to underpin the M&A market

Dry powder remains at record levels ($3 trillion+), much of it raised over the last 24 months, and this liquidity needs to find a home. This will provide a significant underpin to M&A activity, driving ever more creative deal-making. The weight of money in private equity is supported by significant liquidity in the debt markets, with specialist debt funds continuing to be on the rise. Many transactions that had needed equity finance are now fair game for debt-only or hybrid-funding solutions.

3 A progressive reawakening in capital markets

We can expect a step up in IPO activity after a pretty inactive 2019. It is unlikely we will see a significant increase in the number of businesses on the market, however, as we can expect new issues to be largely offset by more public-to-private transactions as private equity increasingly looks for the value in public markets.

4 Private shareholders derisk

With strong valuations and flexible deal structures, the range of options have never been better for entrepreneurs. Prospective changes in tax regimes may speed up some near term plans for equity release. Whatever the future holds for entrepreneurs relief in the UK, the core fundamentals for deal activity remain strong for 2020.

We are delighted to have delivered another record year in our deals business. The investments we have made in deepening our sector expertise and our long-term, relationship-driven approach are really resonating with our clients. Our recognition by Experian MarketIQ as the most active M&A adviser in the UK, retaining our number 1 position, reflects the depth and coverage of our Deal teams in key sectors and across the country. We look forward to another strong year.

Download our review of corporate finance deals in 2019 [ 6345 kb ]

We would like to thank all our clients, and our dedicated team of M&A professionals who go the extra mile to make deals happen. If you are thinking about your strategic options in 2020, we would be delighted to speak to you. Contact Andy Morgan to see how we may be able to assist.

Download our review of corporate finance deals in 2019