M&A activity drops in 2023 but predicted to rebound in 2024

BDO’s Manufacturing Deals Review found that 706 UK manufacturing deals were completed in 2023, down 11 per cent from the 793 deals reported in 2022.

According to BDO, the slower activity was mostly confined to the first half of the year and in the last six months over 400 deals were completed, with the momentum expected to continue into the next 12 months.

Businesses in the engineering services subsector made up 28 per cent of all completed transactions. This was followed by businesses in the food & drink sector (14 per cent), which saw deal volumes increase from 79 in 2022 to 102 in 2023.

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According to additional research by BDO and Make UK, 26.8 per cent of UK manufacturers are looking to make acquisitions in the next two years as they seek to scale up operations and access new products and markets. This figure rises to 38 per cent over a three-to-five-year period.

Of the deals completed in 2023, 16 per cent involved private equity investors and 20 per cent of manufacturers said they are likely to seek private equity investment in the next one to five years.

In a statement, Roger Buckley, UK industrials M&A partner at BDO, said: “For many manufacturers, 2023 was about protecting cashflow and prioritising stability. The second half of the year saw an encouraging resurgence in M&A deals despite ongoing economic challenges, with the lower- and mid-market continuing to transact at volume.

“Looking ahead, digital transformation, automation and the green transition will remain high on the agenda, with sustainability now playing an integral role in almost every deal we see. Private equity still has huge quantities of cash to deploy, and opportunities in the capital markets could well open up towards the end of 2024. Another year of post-Covid trading should help reassure buyers and encourage them to take stock of the huge opportunities an acquisition can bring.”