UK Trends, Opportunities, and Predictions for Deal-Making in 2023

From emerging sectors to shifting deal terms, stay ahead of the curve in UK deal-making.

Despite the macroeconomic and geopolitical challenges that remain as we settle into 2023, there is significant optimism among dealmakers in the UK. From increased deal appetite to a distressed M&A environment, here are some trends and predictions we can expect for the remainder of 2023.

Increased Deal Appetite 

The existing challenges and increased caution surrounding deal execution brought about by recessionary fears, supply chain disruptions and rising interest rates, haven’t stopped middle-market UK M&A from staying strong. 

Deal-making remained active in 2022, as reflected in Firmex’s 2022/2023 M&A Fee Guide — an annual look at M&A advisory fees in the middle market. Out of all survey respondents, more than half (56%) reported expecting their M&A fees to increase. This sentiment rang true, as Firmex deal room creation increased by 18% in Q1 from the end of 2022.  “Our fee percentages for retainers and success fees are the same year on year,” said a managing director of a corporate finance boutique in London. “But our revenue has grown due to increased deal activity.” 

This common sentiment among advisors endures, as is demonstrated in our upcoming Q2 Deal Flow Bulletin. The majority (70%) of European survey respondents felt positive about the current market, with more than half (54%) expecting volume to increase this quarter. Only 37% of advisors expected values to fall, and only 44% thought a recession within the next few years seemed likely, down from 53% six months ago. 

The second half of 2022 saw a match to pre-pandemic levels, and the UK accounted for 25.2% of that deal volume in Europe. Additionally, valuations have returned to normal levels from the highs of 2021. According to the Mergers and Acquisitions Research Centre at Bayes Business School, the UK rose six places year-on-year to establish itself as the third biggest market globally and as the leading country for international dealmaking within Europe — a trend that is likely to continue. 

Based on activity within the Firmex platform, M&A activity is projected to increase by 6% in the coming quarter. The main drivers of deal appetite come down to sellers reinventing business models and modernizing operational capabilities in the face of digital transformation, net-zero targets, and changing consumer behaviors. Not to mention the fact that sellers are offering more flexible terms to get deals done, such as earnouts. Also, an abundance of private equity dry powder needs to be spent as PE firms seek to deploy the capital they accumulated during the pandemic. This could lead to increased competition for deals, particularly in the mid-market. To one European banker, Jan Slaby, partner at COVIS Corporate Finance CZ in Prague, this is a moment when the pent-up demand for deals is being released. “Buyers now have equity to invest,” Slaby said. “And owners of mid-sized companies do not want to face another stressful surprise, now that COVID has subsided.”

Distressed M&A

As we continue to feel the economic impact of the pandemic, low valuations and financial distress are creating increased opportunities for cash-rich buyers to invest in or acquire distressed companies. This has enabled struggling businesses to achieve growth and distressed debt investors to restructure the debt or acquire the assets of the company. In our Q1 Deal Flow Bulletin, seven out of ten advisors reported expecting distressed asset buyers to be increasingly active in 2023. A year ago, only 39% saw distressed asset buyers increasing. Similarly in our Fee Guide, many of the advisors said volume has been steady, but the nature of the transactions is changing. “Growth deals are slowing down, but distressed M&A deals are picking up,” said Greg Bouille, Managing Director, Chiron Financial, Lausanne.

Opportunities to participate in distressed M&A transactions are being seen within the sectors that were hit hard, such as retail, manufacturing and transportation. Such companies look to raise cash or exit unprofitable operations, creating increased group reorganizations, carve-outs, and bolt-on programs. 

Considering the value of a target company in a distressed transaction can deteriorate rapidly, negotiation timelines have been accelerated to alleviate the concerns of creditors and the potential loss of customers, employees and suppliers. Therefore, in addition to accelerated timetables, we can expect less in-depth due diligence and less limited warranty and indemnity insurance packages. This will in turn place emphasis on alternative options, such as holdbacks and escrows. 


As the world faces increased environmental and social challenges, the importance of ESG considerations has grown exponentially and is only expected to continue growing in 2023. In a recent CMS report, 90% of survey respondents say they expect scrutiny of ESG issues in deals to rise in the next three years. Investors are increasingly seeking out businesses that prioritize ESG considerations, with the goal of capitalizing on more attractive value creation opportunities and are pressured to incorporate ESG aspects into their strategic approach to remain competitive. Divestments may also be driven by concerns that a certain business line might be incompatible with long-term ESG and sustainability goals.  

Regulations surrounding ESG considerations are likely to become more stringent in the UK in 2023. This may include changes to reporting requirements or increased scrutiny on companies’ ESG practices. Companies that prioritize ESG considerations will be better equipped to navigate these regulatory changes.

Leading Sectors

The main sector forecasted to drive deal-making is technology, media, and telecommunications (TMT). Out of all 155 survey respondents included in our Fee Guide, 34% specialized in TMT, making it the largest specialty sector. This is largely due to the need for businesses to digitize and adopt new technological solutions. We saw this trend reflected in CMS’s report, tech was expected to be the leading driver of future M&A activity, with 68% of dealmakers ranking TMT as either the highest or second-highest growth area over the coming year. Similarly, the sector accounted for a quarter of both deal volume and value globally in 2022, according to PWC.

The wealth management sector has also seen significant M&A activity, driven by fragmentation, increasing regulation, an aging population of owners, rising sale multiples and private equity investment.Additionally, advisor sentiment within the logistics sector is currently at an all-time high. Barclays and BDO reported in their Logistics Confidence Index that nearly 45% of respondents reported they were looking to make an acquisition over the coming year, with expanding their service offering and achieving economies of scale cited as the most common motivation behind M&A plans. Factors driving this trend include a need to expand geographically, diversify service offerings, achieve economies of scale and, crucially, improve tech uptake in order to help overcome the challenges posed by supply chain disruption.


Amid headwinds, the dust is settling and the M&A market has shown resilience. With considerable optimism among dealmakers and business owners and an abundant supply of businesses for sale, we can expect great things for the remaining quarters of 2023.


Brought to you by Team Firmex.