Local Spotlight: Deal Drivers in the United Kingdom

Suzy Bibko, Content Marketing Manager, EMEA

What does M&A look like for dealmakers in the United Kingdom as we navigate the current waters? What might UK M&A look like going forward? Will it be better? Stronger? Something completely different? What will drive a recovery? And which technologies will help deliver deals? Our recent live virtual briefing, in partnership with Mergermarket and moderated by Ryan Gould, asked Richard Moulton, Michel Driessen and Jonathan Hughes for their views on these burning questions, as well as our viewers for their thoughts.

Driving Market Recovery: Restructuring
UK M&A had a great Q1 2020, with a total of €55.8bn in announced deals, up 93% yoy, according to Mergermarket data and our Deal Drivers: United Kingdom Q1 2020 report. But as the pandemic took hold in March, things now seem less certain as to what lies ahead.

“We certainly don’t see anyone who’s in a mad rush to put money to work in the short term,” says Jonathan Hughes, VP of Sales, UK & Ireland. “However, we have seen plenty of deals progressing that were signed before lockdown. And some deals we feared would go away are now coming back to life. New deals may be significantly reduced, but clients anticipate a real uptick in Q3 and Q4.”

So, it may not be all doom and gloom. Indeed, it appears that most people think that work-arounds will dominate: in a nutshell, it will be restructurings rather than liquidations. However, consumer confidence and optimism are also integral to a recovery, as many people want to return to ‘normal’ – whether that will be possible is difficult to tell. But the UK government stimulus has helped to get things rolling, acting as a building block or the first step that has been needed to move upwards.

But if restructurings will dominate the UK market, which type? Most believe it will be divestitures and carve-outs, rather than liquidation. Perhaps this is the optimism mentioned above at work combined with the record levels of dry powder for PE that needs to be deployed. So, both sellers and buyers recognize that opportunities will become available, so long as the confidence is there.

Doing Deals Virtually Essential
But how will these deals get done, especially with more people working from home now? Obviously, the answer is through technology. But technology covers a broad spectrum – from simple word processing programs and email to AI and machine learning. For dealmakers, they overwhelmingly feel that they need the capability to complete due diligence virtually/remotely. Which makes sense right now. How else will the deals get done? And that’s good news for Datasite, as virtual due diligence is our speciality. 

“We recognize that you cannot replicate in-person meetings completely with technology, but clients are getting creative and more comfortable with technology,” stresses Hughes. “So, tools like Datasite for Due Diligence with Integrated Redaction is becoming second-nature and really a must-have right now. Moreover, firms are realizing that they need to avoid data flight and are using technology like Datasite to help prepare even earlier for potential restructurings or deals. Capability to complete is still number one for everyone, and Datasite can help ensure that gets done.”