The year was ‘characterised by a challenging economic climate and investor caution following the banking crisis in March’, says expert

The average UK insurance merger and acquisition (M&A) deal value fell “significantly” in 2023, a statement released yesterday (16 January 2024) said.

According to Ernst and Young LLP’s (EY) latest financial services M&A analysis, deal value fell from £5.1bn to £3.3bn year-on-year.

However, the number of deals registered rose from 98 in 2022 to 112 in 2023.

Despite this, EY UK financial services strategy and transactions leader Tom Groom said deal value would have been affected last year due to a ”challenging economic climate and investor caution following the banking crisis in March”.

“Sustained high interest rates, recessionary concerns and growing geopolitical tensions have [also] increased unease in recent months, driving some firms to pause or even reconsider M&A plans,” he added.

“As a result, the UK financial services industry recorded a slowdown in M&A activity.”

Interest rate projection

EY considered transactions that took place between 1 January 2023 and 31 December 2023 for the analysis.

Deals where it was disclosed that less than 20% of the company was acquired were excluded.

Overall, the UK financial services industry – including banking, insurance and asset management – reported 273 deals in 2023, representing a 9% decrease compared to the 301 deals recorded in 2022.

The total disclosed deal value for 2023 also fell from £14.9bn in 2022 to £12.1bn last year – the lowest figure on record since 2014.

Meanwhile, the number of non-UK firms acquiring businesses in the UK fell to 54 in 2023 – down from 65 in 2022. Total value also fell from £7.7bn in 2022 to £6.3bn in 2023.

As for UK firms acquiring businesses overseas, a total of 66 deals took place in 2023 compared to 69 in 2022.

However, Groom said market confidence “should lift” in 2024 with interest rates projected to fall during the year.

“As a result, we anticipate M&A activity to increase throughout 2024 as firms look at new ways to innovate and grow in this improved economic environment,” he added.