Real Deals | Roundtable: Green Shoots for the UK Mid-market

Sep 2024

Originally posted by Real Deals on September 18, 2024.

The UK and wider market are filled with cautious optimism as macroeconomic challenges cool, providing hope that higher levels of transaction and lending activity can return. However, geopolitical challenges in Europe and the U.S. remain potential disrupters.

According to Matthew Lee, head of Lincoln International’s UK office and co-head of the firm’s European Healthcare Group, the mergers and acquisitions (M&A) turnaround hasn’t happened yet. U.S. data highlights that the market is up, with the big five investment banks up 40% in revenue – posting their top quarter since 2022. Debt is growing 100% year-on-year since many companies are refinancing due to tightening margins and normalizing leverage multiples.

He said Europe on a value basis year-to-date versus last year is mostly flat and down 20% volume-wise. In the UK, volumes are down around 20% and value is down 40% because of the lack of comparable large deals.

However, there are reasons to be optimistic about M&A.

“Inflation is starting to flatten out at 2%, albeit it hasn’t gone down in the most recent reading, GPs need to return capital to LPs and there is a wall of PE dry powder that needs to be deployed,” Matthew said. “But we’re also looking at company fundamentals as an encouraging sign.”

In terms of lending, Bain & Company data indicates that the top 20 global funds accounted for 50% of fundraising last year. Matthew said this shows how the base is narrowing and there may be more of a churn. He noted that Lincoln has seen several mid-market funds postpone fundraises or experience challenges.

View additional insights in the original, gated article.