It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Ben Coggin, Partner and Transaction Services Leader for EY in Yorkshire and the North East, on prospects for the Mergers and Acquisitions market.
The Mergers and Acquisitions (M&A) market is undoubtedly in a more complex place compared to this time last year as it contends with a range of challenging headwinds, with geopolitical instability, inflation and interest rates weighing significantly on deal volumes and activity throughout 2023. These factors are likely to continue having an impact on deal activity in 2024 and, as such, the outlook for the deals market is difficult to predict.
That said, there is undoubtedly still an appetite to do deals. Corporate acquirers have continued to transact and have benefitted from a period of decreased competition as private equity has weathered the headwinds of rising interest rates and an uncertain debt market. For private equity investors, many of whom have raised funds recently in addition to sitting on record levels of capital, there is a real need to source and deliver on deals in 2024 to deploy capital raised. When headwinds stabilise, private equity will be well-placed to drive a resurgence in M&A activity.
Deal activity currently reflects a buoyant mid-market, with acquirers favouring the lower risk profile, reduced financing requirements and ease of execution associated with smaller deals as they target strategic growth opportunities and look to capitalise on a narrowing valuation gap between buyers and sellers. For those in Yorkshire, and across the North, a buoyant mid-market should be welcome news as we move into 2024.
From a sector perspective, technology and digital transformation are driving deal activity – a trend that will continue into 2024 – particularly as investors and CEOs recognise the potential disruptive impact of Generative Artificial Intelligence (GenAI). The latest EY CEO Outlook Pulse survey found that nearly all (99%) of the UK CEOs interviewed are making or planning significant capital investments in GenAI in the next 12 months. Whilst this is likely to result in a substantial uptick in investment in the sector, an increase in companies claiming AI expertise will likely complicate decisions about identifying and implementing credible value-adding ecosystem partnerships and acquisitions.
