The UK financial services industry has reported a 10-year M&A volume high of 160 deals in H1 2023, up from 138 in the same period in 2022 accounting for a 16% rise, according to EY’s latest financial services M&A analysis.
However, the total disclosed deal value for the period fell from £11.5 billion in the first half of 2022 to £4.7 billion in the first half of 2023, representing the lowest level of activity by value since the start of the pandemic.
Sector-specific M&A activity breakdown across UK’s financial markets reported that the number of UK insurance deals rose from 48 in H1 2022 to 54 in H1 2023. Although, the total publicly disclosed deal value fell from £3.8 billion to £16 million year-on-year.
In the banking sector, there were 39 deals in H1 2023, compared to 35 in H1 2022, however, the total publicly disclosed deal value fell from £4 billion to £3.2bn year-on-year. In the UK wealth and asset on management industry, there was a rise in deals with 55 in H1 2022 to 67 in H1 2023. The trend remained the same here as well and the total publicly disclosed deal value fell from £3.7 billion to £1.5 billion year-on-year.
Tom Groom, UK Financial Services Strategy and Transactions Leader at EY, commented, “UK financial services M&A activity recorded a ten-year high in the number of transactions in the first half of 2023, demonstrating firms’ strong appetite for deal-making in the wake of the pandemic. However, economic headwinds at the start of the year – such as rising interest rates and inflationary pressures – caused many lenders to pull back from financing large deals, and the value of M&A activity is now less than half of where it stood during the same period last year.”
Non-UK firms acquiring UK targets increased to 35 in H1 2023 from last year by one, and total value fell from £3 billion in H1 2022 to £0.2 billion in H1 2023.
UK firms acquiring overseas targets, fell from 34 deals in H1 2022 to 28 deals in H1 2022, with a lower overall deal value of £ 2.8 billion in H1 2023, down from £4.9 billion in H1 2022.
Groom concludes, “The macroeconomic environment this year has undoubtedly impacted deal value, with a continued reduction in private equity involvement in particular. However, the key drivers of M&A – being growth, innovation and synergies between businesses – remain, and as firms develop approaches to deliver M&A in this higher rate environment, we anticipate a return to higher deal values.”
