2024 was a massive year for M&A, with increased post-budget certainty driving the UK to become the biggest player in Europe for dealmaking. Every year, we look back at the LAVA team’s predictions, and how they played out against the reality of the market.
Let’s have a look at how they got on…
Hamish Martin, LAVA Partner
Prediction: ‘We appear to be entering a period of relative certainty which offers a window of opportunity for deal-doers to put their capital to work. We are expecting UK and US elections later this year which may impact this, as could the risk of the conflict in Palestine evolving into a wider conflict across the Middle East. For the best assets, valuations will continue to be robust which can agitate the value gap that is often evident in the lower quality assets. We expect caution in the due diligence process to continue with deals taking time to complete as acquirers work on building the confidence of the internal decision-makers.”
Outcome: Mostly right
The ‘window of opportunity’ for dealmakers proved pretty accurate, with significant activity seen in the first half of 2024. However, ongoing global conflicts and UK political uncertainty threatened momentum until the early election clarified things. Valuations for high-quality assets remained strong, but the cautious due diligence process continued to elongate deal timelines, until the budget was announced, then we saw a rush of deals completing ahead of the CGT rise.
Simon Woodcock, LAVA Partner
Prediction: ‘Management teams and custodians of investment vehicles are under serious pressure to put capital to work and make bold strategic moves in 2024. Caution and thorough diligence will not disappear quickly, so patience and a higher degree of engagement and trust need to be built between buyers and sellers in order to complete deals. More time invested in building trust at a human level is what it will take to unlock great deals for the next year.’
Outcome: Mostly right
The emphasis on trust and patience resonated throughout the year. Buyers and sellers increasingly prioritised relationship-building to bridge valuation gaps and navigate lengthy due diligence processes. Many successful deals were attributed to deeper engagement and transparent communication, especially in people centric sectors like accountancy and professional consulting services.
Millie Counsell, Assistant Manager
Prediction: ‘For 2024, I think we’ll see many buyers take their buy and build strategy back to first principles and reassess what they are looking to achieve as opposed to doing large volumes of acquisitions, as was possible with past debt availability and cost. As the strategic rationale behind each transaction is strengthened, I think this is where we will really see trade and PE-backed trade out-bid PE and drive activity and valuations in the market, or at the very least close the gap to PE valuations of past years.’
Outcome: Spot on
Buy-and-build strategies slowed, with many firms focusing on smaller, more strategic acquisitions rather than pursuing volume-driven approaches. Private equity firms led the charge, reassessing their rationale and prioritising bolt-on deals in established platforms, but we also saw trade buyers coming back with competitive bidding for bolt-ons that, in other market conditions, might have been platforms themselves.
Tom Rowe-Jones, Director
Prediction: ‘It’s an interesting one, I’ve heard a lot of “things will get better in Q1/Q2 ‘24” but whether that’s out of hope or a rational opinion based on the broader macroeconomic indicators is still to be confirmed! As I mentioned in the 2023 predictions, there is still a lot of capital available to deploy from private equity investors and so for a well-managed, robust and growing business with an ambitious management team, there will always be a list of suitors queuing up to invest or acquire. I think corporate activity will continue to drive deal activity next year, both from PE-backed businesses looking for bolt-ons and larger corporates. Value creation through operational and commercial synergies in markets they know not only provides limited downside but an opportunity to achieve exceptional returns. One thing we have observed in the lower-mid market is larger businesses acquiring smaller organisations that have a particular capability, niche sector focus or technology they lack, but when applied to their operational and global sales infrastructure, can drive immediate growth and I expect that to be a key theme continuing into next year.’
Outcome: Almost right
Corporate consolidation was indeed a major driver in 2024, particularly in the lower-mid market, where a lot of PE activity we saw was bolt-on related. Large corporates acquired niche or capability-focused smaller firms to enhance their offerings or market coverage. Broader optimism about early-year recovery seemed hopeful, as geopolitical and economic uncertainties tempered momentum, but overall the market rebounded significantly better than expected.
Loïc Bourdonnec, Associate Director
Prediction: ‘Looking ahead to 2024, I anticipate a marked increase in M&A activities. The build-up of unallocated capital, amidst a backdrop of limited investment avenues, is poised to drive investors towards more proactive capital deployment, especially considering the potential political developments in the UK. In an environment of ongoing flux, the emphasis on ensuring the feasibility of transactions will be even more critical. This is particularly relevant for lower mid-market ventures and for businesses planning exits or aiming to secure their wealth. Achieving success in the forthcoming year will call for a nuanced strategy that balances rigorous due diligence with the agility to adapt to the changing market landscape.’
Outcome: Mostly right
Unallocated capital continued to drive M&A, particularly from private equity. However, investors were highly selective, with deals focused on sectors showing resilience, such as defence and renewable energy. The lower-mid market saw more activity than expected, but many deals faced delays due to heightened scrutiny and the need for robust feasibility assessments.
Ivo Brett, Analyst
Prediction: ‘The outlook among the UK M&A community appears to be positive; a relative movement away from an extended period of uncertainty and less volatility in the debt markets will begin to drive higher deal volumes in 2024. While I would agree that we will see more deployment of the large amounts of dry powder within many private equity houses, particularly towards the creation of new platforms, I would hesitate to subscribe to a period of macro-stability. A seemingly inevitable change in government, alongside ongoing conflicts around the globe, aren’t conditions conducive to lasting economic or political certainty. In light of this, the priority for businesses may remain on cost reduction, cash control, and, essentially for M&A, value creation. I would expect similar levels of scrutiny in the deal process that has been seen in 2023, but favourable valuations to be reached as stronger strategic rationale is targeted.’
Outcome: Almost right
M&A volumes increased in 2024, driven by private equity platform strategy and favourable valuations. However, the hoped-for macro-stability did not materialise due to political and global conflicts, forcing businesses to maintain a focus on cost efficiencies and value creation. Strategic rationales were critical to navigating ongoing scrutiny in dealmaking.
So how did we do?
Most of the LAVA team’s predictions actually captured, pretty accurately, the cautious optimism and strategic focus that defined the M&A market in 2024. Uncertainty around various global elections and conflicts tempered some activity, but strong valuations, sector consolidation, and PE-driven bolt-ons remained consistent themes throughout the year and drove the UK to be the biggest dealmaker in Europe through 2024. Robust due diligence and relationship-building proved pivotal in executing deals, aligning with many forecasters’ expectations.
As we move into 2025, the outlook for M&A remains positive. The momentum gained in 2024 is expected to continue, supported by more stable economic conditions and sustained investor confidence, but market participants will need to remain vigilant, considering potential regulatory challenges and global economic shifts, as well as taking proactive steps to ready themselves ahead of any potential transaction.
Get in touch to find out how LAVA could help you make your next big move. Buy side, sell side, or purely advisory, LAVA has the answers.
