The volume of deals in the UK’s financial services sector rose to a seven-year high in the first half of the year but a looming recession and economic uncertainty caused the value of transactions to plunge, new figures have revealed.
A total of 136 deals were announced in the six months to June – up from 118 in the same period in 2021 – but deal value slumped from £10.5bn to £8.6bn, according to new figures from big four firm EY.
The second quarter of 2022 also saw a marked slowdown in both volume and value as recessionary fears and geopolitical volatility hit M&A activity and caused dealmakers to pull back from execution.
“UK M&A activity had a strong start to the year as expectations that the economy would bounce back to pre-pandemic levels were high,” said Tom Groom, UK Financial Services Strategy and Transactions Leader at EY.
“However, although we are looking at a seven-year H1 deal volume peak, activity fell between the first two quarters of this year as geopolitical tensions began to impact the market, and have led to rising inflation and supply issues.”
Deals in the wealth and asset management plunged faster than other sectors as total value fell from £6.1bn to £2.6bn compared to 2021. Figures were buoyed by the £1.6bn swoop by the Royal Bank of Canada on asset manager Brewin Dolphin in March.
The UK’s banking sector saw 34 deals in the first six months of the year, with Barclays recent £2.3bn acquisition of mortgage lender Kensington pushing total deal value to £3.6bn, up from £3bn last year.
Deal value in the insurance sector meanwhile jumped from £1.4bn in 2021 to £2.4bn this year.
UK firms retained their appeal to international suitors, the figures showed. Depressed valuations of presented opportunities to international buyers as 33 non-UK firms acquired UK targets in the first half of 2022, compared to 31 in the same period in 2021. Total value of international deals halved from £4.2bn in 2021 to £2.1bn in 2022, however.
The figures come as M&A activity globally slumps amid extreme turbulence in the market.
The value of total announced deals globally slumped nearly 25.5 per cent year-on-year to $1tn in the second quarter of 2022, according to data from Dealogic, after a frenzy of dealmaking last year came to an end.