Activity in the UK M&A market has surged in the first half of 2024, with transaction values more than doubling year over year amid a rising number of mega deals.

The aggregate transaction value of announced M&A transactions in the country jumped to £85.05 billion in the six months to June 30, versus £37.08 billion in the same period last year, S&P Global Market Intelligence data shows.

While the overall number of announced deals is still below levels seen during a 2021 M&A boom, the number of completed transactions valued at over £1 billion has increased year over year, pointing to a market recovery in 2024. Foreign bidders, especially from the US, have been more active in the UK market over the first half, chasing good quality assets at bargain prices as UK valuations remain low, while deal premia are high, market observers said.

The market rebound from a very weak 2023 could be attributed to a combination of improved valuation fundamentals, financing availability and pricing as well as greater confidence among market participants, Patrick Sarch, a partner and head of UK public M&A at law firm White & Case, said in an interview.

A key driver of activity over the first six months of 2024 has been the turning interest rate cycle with more certainty about expected rate cuts boosting investor sentiment, Sarch said. Inflation has also started to cool off, helping to lower the cost of financing deals.

Bigger and better

The number of deals valued between £500 million and £1.5 billion has increased, and competition among bidders for deals of over £1 billion has intensified, Sarch said. Larger club deals, where two or more private equity firms acquire an asset, are also coming to market, he noted.

All this is a positive sign for activity in the next couple of years, with the market building up to "bigger and better deals" already there, Sarch said.

The largest completed M&A deal involving a UK target in the first half of 2024 was US-based private equity firm GTCR LLC's £9.99 billion acquisition of a 55% stake in payments provider WorldPay (UK) Limited, Market Intelligence data shows. There were at least 10 deals over the £1 billion mark, according to the data.

White & Case's analysts indicate that the number of mega deals, those valued over £1 billion, has more than tripled to 10 from only three in the first half of 2023. There have been competing offers on 60% of all mega deals that happened in the first half of 2024, the law firm said in its latest UK public M&A market update.

Foreign bids boom

US bidders were the most active in UK public M&A in the first half of 2024, having been involved in 41% of firm offers and accounting for 54% of aggregate deal value booked over the period, according to White & Case estimates.

Although UK valuations have increased significantly this year, they are still half of those in the US, and therefore, appealing to investors, Sarch said. At over 50%, deal premia in the UK have also stayed attractive, he noted.

– Explore the details of GTCR's acquisition of WorldPay. – Find out more about the bidding for Hargreaves Lansdown. – Access M&A data via the CIQ Pro screener tool.

Foreign investor interest in the UK has soared in the first half of this year, with 73% of UK target M&A involving an overseas buyer — the highest share seen in 12 years, the London Stock Exchange Group (LSEG) said in its latest sector report. The UK was the second-most targeted market for M&A globally, accounting for 7% of global M&A activity, which is the highest share seen in six years, the LSEG said.

Sector trends

The sectors with the highest number of announced M&A transactions in the UK over the first half of 2024 were industrials, technology, telecommunications and media (TMT), consumer, financial services, and real estate, Market Intelligence data shows.

The UK led financial services M&A activity in Europe, accounting for the highest number of deals and the largest transaction in both the first and second quarter of 2024, the data shows.

UK financial services M&A is likely to remain strong in the coming quarters with buyers having extra capital to spend and more acquisition opportunities among sub-scale growth firms in the sector, Sarch said.

Bank profits have soared amid recent interest rate hikes, increasing their capacity to do new acquisitions. At the same time, the number of available M&A targets has grown as smaller firms, especially in financial technology, have struggled to stay afloat or raise more capital with which to scale up, Sarch said.

With a healthy pipeline and surging deal values, the UK M&A market overall is expected to stay busy in the second half of 2024 and beyond, Sarch noted.

2024 outlook

"We don't see the UK market slowing down," Sonica Tolani, a partner and public M&A specialist at White & Case, told Market Intelligence. "If anything, we're seeing new deals pop up once a week, if not more frequently."

More high-value deals, such as CVC Capital Partners PLC and the Abu Dhabi Investment Authority's joint £5.4 billion bid for UK investment firm Hargreaves Lansdown PLC, are also expected to come to market in the second half of 2024, Tolani said.

Events surrounding the US election are not likely to impact investor appetite with US bidders expected to stay active in the second half of 2024, according to Tolani. UK M&A will also stay highly competitive with more "too-close-to-call" deals over the coming quarters as shareholders are keeping their options open in case a higher bid comes along.

"No longer can you say to a client, it's in the bag…People are going to always want to wait to see if there's more money to be made and a better deal to be had," Tolani said.