UK M&A professionals are optimistic about deal activity and expect it to increase over the next 12 months despite foreseeing a reduction in multiples, even as inflation increases are priced into models, according to a new survey from Datasite.
When it comes to deal types, most UK M&A professionals surveyed expect to see the biggest increase in debt financing (50%) and transformational acquisitions or mergers (43%). Additionally, most UK dealmakers (75%) are pricing at least a 5-7% increase in inflation, if not higher, into their financial valuation models for the rest of the year.
Uncertain valuations, inflation and the Russia-Ukraine war are affecting other aspects of dealmaking, including deal size and the timing of completion. UK dealmakers said the war (33%), as well as inflation and the cost of capital (19%), are factors likely to prevent a deal from closing before the end of 2022.
Qualitative feedback from dealmakers also points to uncertainty around valuations as another factor having a significant effect on M&A overall, including pausing larger acquisitions and merger processes, especially among corporate and private equity dealmakers.
The survey also reveals that 61% expect to do the most cross-border deals with the US, followed by deals between the UK and the EMEA region (40%), while 47% anticipate a greater focus on technology to boost productivity in response to the Great Resignation hitting the M&A talent market. Some 75%, meanwhile, predict inflation to increase M&A salaries by at least 5-7%, if not higher, by the end of the year.
