Financial services M&A activity in the UK saw a 9% fall in 2023, with 273 deals recorded in the year compared to 301 deals in 2022, according to EY’s latest financial services M&A analysis.
Additionally, the report found that the total disclosed deal value for the year fell to £12.1bn in 2023, from £14.9bn in 2022, which according to analysts is the lowest figure since 2014.
Tom Groom, UK Financial Services Strategy and Transactions Leader at EY, comments: “Despite a promising start to the year, 2023 was characterised by a challenging economic climate and investor caution following the banking crisis in March.
“In addition, sustained high interest rates, recessionary concerns and growing geopolitical tensions have increased unease in recent months, driving some firms to pause or even reconsider M&A plans. As a result, the UK financial services industry recorded a slowdown in M&A activity in both the number and value of transactions this year.”
The number of UK banking deals fell from 71 in 2022 to 54 in 2023, although the total publicly disclosed deal value rose from £4.3bn to £6.7bn year-on-year, the report revealed.
At the same time, the number and size of deals in the UK wealth and asset management industry fell from 132 in 2022 to 107 in 2023, with deal value more than halving, from £5.6bn to £2.1bn year-on-year.
While insurance deals in the country rose from 98 in 2022 to 112 in 2023, the total deal value fell significantly, from £5.1bn in 2022 to £3.3bn in 2023.
Analysts also noted that the number of non-UK firms acquiring UK targets fell to 54 in 2023 from 65 in 2022, with total value also falling from £7.7bn in 2022 to £6.3bn in 2023.
As for UK firms acquiring overseas, even though it was not very large, targets fell from 69 deals in 2022 to 66 deals in 2023, with an overall deal value of £1.7bn in 2023, down from £3.2bn in 2022.
“The challenging macroeconomic climate impacted M&A activity in 2023. While many of the headwinds are still present this year interest rates are projected to fall, which should lift market confidence. As a result, we anticipate M&A activity to increase throughout 2024 as firms look at new ways to innovate and grow in this improved economic environment,” Tom Groom concluded.
