Read the M&A Outlook 2023 summary here >

Mood and Momentum

  • M&A markets are significantly driven by mood and momentum
  • In 2019, pre covid, the mood was positive and momentum strong – on the back of 11 years of ever-increasing deal volumes. In the 11 months to November, 18,000 deals up to £1bn completed

We felt good…

  • We then experienced two exceptional covid-impacted years where the mood vacillated from deep despair to unbridled exuberance and momentum from inertia to irresistible momentum
  • In 2022, the mood has changed, momentum has been lost – and yet 24,000 deals were completed in the first 11 months of 2022, a 28% increase on the same period in 2019* and the second highest volume in history - but the mood is miserable
  • So, what happened in 2022? And what do we anticipate for 2023 and beyond?

Review of 2022

  • It is no surprise that the exceptional M&A year that was 2021 has not been repeated in 2022. This year has been grimly exceptional from a geopolitical and economic standpoint
  • After the exuberance of 2021, we anticipated a reduction in deal activity – and that was before the invasion of Ukraine


2022 vs 2021 - deal volume and value % change

Volume / value percentage change calculated as January to November’22 vs. January to November‘21 with deal values less than £1bn, including undisclosed deal values. Bubble size represents deal volumes for January to November’22

  • Deal volumes were down from 26,000 to 24,000 – a decline of 10%
  • All major sectors showed both reduced volumes of deal activity and reduced valuations
  • Notwithstanding difficult news for public technology companies; in M&A, technology has retained its status as the most active sector
  • We would have speculated that the relative proximity of the war in Ukraine and the immediate impact on the economies of Europe, that Europe would account for a diminishing share of global deals
  • That is not the case. Since 2019, Europe has consistently made up 40% of all deals and in 2022 it has been 41%

Up to £1bn,
Jan > Nov

2021 #deals

% of total

2022 #deals

% of total

2022 increase / (decrease) - %

























2022 vs 2019

  • Given that both 2020 and 2021 were exceptional; the first for Covid and the second for its exuberant bounce back, we think it worth making a comparison to the last ‘unexceptional’ year – 2019

Volume / value percentage change calculated as January to November’22 vs. January to November‘19 with deal values less than £1bn, including undisclosed deal values. Bubble size represents deal volumes for January to November’22

  • Volumes are up by 28% on 2019 driven by the sectors that have performed well through the Covid pandemic: Technology, Healthcare, Pharma and Financial Services
  • 2022 was the second strongest year on record for deal volumes. So why does it feel so poor compared to 2019?
  • The difference is both in the mood – driven by geopolitics, inflation, and the fear of the future...

...And in the momentum

  • The momentum of the 2021 exuberance carried us through the first half of the year
  • The blazing Summer of 2022 scorched the earth – literally and for M&A
  • Monthly volumes have suffered a significant decline with 1,400 deals in November as compared to 2,800 in January and 2,300 in June
  • Momentum has slowed and the mood has changed

The Mood in late 2022

  • Investors who had been risk-averse but active, became inactive – and more risk averse
  • Debt which had been widely available and cheap became genuinely scarce and nearly twice as expensive
  • Buying a business is about predicting the future – a confident cash-backed prediction of:
    • future markets
    • future financial performance; and
    • future valuations
  • Buyers don’t necessarily need positivity to make those predictions, but they do require stability
  • Very few bidders can feel confident of these factors unless:
    • the business is exceptional; or
    • the uncertainty is priced into the deal – “it’s cheap”
  • And so for equity investors – to misquote Lincoln - “better not to invest and be thought a fool, than to invest and remove all doubt”
  • And this reluctance to invest equity is exacerbated by the attitude of lenders who have less to gain and more to lose from getting it wrong
  • This circle of diminishing confidence has led to 32% fewer deals by private equity, down from 900 deals a month in 1H22 to 600 deals a month since
  • But, as yet, there have been no signs that corporates are any more active

Corporates vs Private Equity

  • In last year’s edition of this review we reported the significant surge in the market share of deals completed by private equity – from 25% in 2019 to over 35% in 2021. This market share has been maintained in the US throughout 2022 at c. 50%. Europe and Asia have seen falls in the year but remain well ahead of historic norms

Up to £1bn,
Jan > Nov





% PE

% Trade

% PE

% Trade

% PE

% Trade















  • In Europe and Asia, Corporates have maintained a consistent level of dealmaking and consequently taken market share
  • In the short term we expect corporate bidders to continue this trend and be able to compete more productively than in the recent past for the assets
  • For the exceptional assets, the strategic premium available to corporates is likely to be matched by the wall of uninvested capital available to private equity
  • For the next best businesses there is a real chance that the strategic premium, combined with less febrile processes, will enable corporates to prevail
  • And there is a significant likelihood that a whole tier of businesses that are “not quite good enough” for risk-averse private equity find a corporate home

Mood and Momentum – the beginnings of a shift?

  • We are now entering a new year
  • Notwithstanding the genuine pain that the recession and winter bills will cause to consumers, the mood in the market feels more positive than it did a month ago
  • Lenders are resolving stress in their current portfolio; are resigned to some inevitable restructuring; and are beginning to contemplate new opportunities
  • Private equity have spent time identifying businesses which can endure or benefit from inflation, have strong market positions and generate significant margins and cash
  • Corporates have realised that the febrile pace of deal-making that favoured private equity is now dramatically reduced

Looking forward to 2023

  • Against this marginal mood shift, will the end of the year and the holiday break bring a change?
  • Will it break the momentum and presage a material downturn?
  • Or will it see investors and lenders refreshed and ready to transact?
  • We tend towards the latter. There are a significant number of businesses prepared and ready to launch sale processes
  • Momentum is not yet positive but there is the beginning of “hope”; nevertheless

Valuations will come down

  • It is difficult for sellers to accept, but valuations will come down as a consequence of:
    • reduced quantities of debt at increased pricing
    • reduced confidence in the delivery of a business plan
    • reduced benchmark valuations in public companies; and
    • reduced expectations of future valuations
  • Buyers are “there” already. They can see these dynamics as they look forward to recession and reflect it in their models
  • Sellers find it easier, and more comforting, to look backwards and reference past valuations as their benchmarks
  • This leads to a degree of inertia notwithstanding good intentions; and so to lost momentum
  • We do not anticipate a dramatic change in momentum will happen quickly. Vendors will be anxious that value expectations will not be met and will be looking for – but not necessarily finding – hard evidence that starting a process will lead to a successful outcome
  • But the rules are different for the very best businesses. Very full valuations persist – probably because buyers are prepared to accept a lower return in exchange for the opportunity to deploy capital “safely”

2023 – First half

  • Potential buyers – inevitably risk averse – will be wary that the 'winter impact' and the cost-of-living crisis will further erode confidence and so will be very selective and very diligent
  • Potential vendors – inevitably risk averse – will likely be reluctant to launch into uncertainty
  • This is likely to lead to a slow first quarter as transactions stutter to a start
  • We expect the strongest starters to be in Infrastructure, Technology and ESG-related sectors
  • Elsewhere, we anticipate an acceleration in completed transactions before the Summer
  • As a consequence, we anticipate that levels of deal activity will likely be flat with current levels for the first six months of 2023

2023 – second half

  • We anticipate that deal activity in H2 2023 will likely increase
  • As night follows day, private equity need to realise as well as invest. Once the market is perceived to be stable, the impact of inflation is better understood and the new valuation reality is established, decisions can be made
  • We anticipate that those decisions will be made in Q2 and lead to increased levels of activity in the second half of the year

Reaction to uncertainty

  • Given that both buyers and sellers are risk averse we anticipate an increase in:
    • bilateral, high confidence transactions
    • strategic buyers; and
    • continuation fund transactions
  • Each of these has the capacity to provide greater certainty for vendors and lower levels of distraction than a full-blown sale process and allows buyers a higher probability of success

Beyond 2023

  • We should we anticipate a recovery in M&A volumes over the next 2-3 years?
  • The lessons of the Great Financial Crisis (‘GFC’) are interesting
    • in 2007 just over 16,000 deals were completed. Volumes dropped very sharply and by 2009 hit a low of 10,000 deals and took until 2014 to achieve the 2007 level
    • given that market commentators are forecasting a deeper, longer recession and consumers are likely to be harder hit by the cost-of-living crisis – should we anticipate such a prolonged level of reduced activity?
  • We think not – and the primary reason is that many more businesses are in Private Equity ownership. Prior to the GFC, Private Equity made up in the region of 20% of the market, in the recent past in the US and Europe it has been nearly 50%
  • Consequently, the stock of businesses that will inevitably be sold has increased dramatically – and they have a “sell by date”
  • Hold periods will likely be extended and returns will be lower but the market will take much of the blame. A vintage of funds will generate somewhat disappointing returns; but.... “the dogs will bark and the caravan will move on”


  • The new normal will be much like the old normal
  • We “enjoyed” the markets of 2017, 2018 and 2019 with deal volumes at c.5,000 per quarter
  • We have benefitted from a brief period of dramatically inflated activity of 7,000+ deals per quarter
  • Current run-rate volumes are c.4,500 per quarter
  • We anticipate a slightly reduced level of activity in Q1 followed by an uptick to c.5,000 a quarter thereafter
  • We “enjoyed” that level of activity in the past and we will have to learn to enjoy it again over the next few years
  • The mood may be miserable, and momentum may be weak, but we should reflect that the energy, enthusiasm and ingenuity that has fuelled the markets is still there. In time it will come to the fore again

To discuss the report in more detail, or to contact one of our bankers, please visit our banker profiles below.

Predicting future activity is an art and not a science and this analysis is not scientific. It is informed judgement – much like the best M&A advice.

*All data included in this report was sourced from Mergermarket
Dataset for each time frame outlined, comprises all reported acquisitions with deal values less than £1bn, including those with undisclosed values, across all sectors and geographies.

Insights and Publications disclaimer >