The State of the M&A Market as 2024 Closes: Challenges & Opportunities

The global M&A landscape has been on a rollercoaster in recent years. The aftershocks of the pandemic, rising interest rates, heightened regulatory scrutiny, and the growing importance of ESG (Environmental, Social, and Governance) considerations have combined to create a more complex environment than ever before. While 2023 saw a global slowdown—with deal activity falling by 16% compared to the previous year—2024 has brought tentative signs of recovery. Global deal values in the first half of 2024 were up around 5% compared to H1 2023, a modest but encouraging uptick.

For UK SMEs, typically with revenues between £1 million and £10 million, understanding the nuances of this evolving market is critical. Although deal timelines are stretching and valuation multiples are adjusting, there are still valuable opportunities for those who prepare strategically. In this blog, we’ll explore the current state of the M&A market, what’s driving these shifts, and the implications for UK SME owners.

A Shifting Global Landscape

The M&A market’s performance varies widely by region. While North America and Western Europe have started to show signs of renewed investor confidence, other areas—such as parts of South America and Africa—remain subdued. The UK sits somewhat in the middle of this spectrum. Post-Brexit adjustments continue to shape investor sentiment, yet the UK’s stable legal system, robust financial markets, and mature corporate governance structures keep it on the radar for both domestic and international buyers.

Private equity (PE) remains active, albeit more selective. Multiples have compressed for smaller deals, particularly those under £10 million, largely due to higher borrowing costs. Buyers must ensure target companies can withstand rising interest expenses, meaning thorough and sometimes lengthy due diligence is non-negotiable.

Why Deals Are Taking Longer

One of the clearest indicators of today’s challenging environment is the extended timeframe to complete deals. The average deal duration in the UK now stands at 258 days—a striking figure that demonstrates how complexity, caution, and regulatory oversight are slowing the pace of M&A transactions.

High Interest Rates and Financing Challenges

The era of ultra-low interest rates is behind us, making debt more expensive and harder to obtain. Buyers, whether corporate acquirers or PE investors, need to be certain of a target’s fundamentals before taking on costly leverage. This caution naturally extends deal timelines, as parties undertake more exhaustive financial analysis to justify their valuations and borrowing structures.

Intensified Regulatory Scrutiny

Regulators worldwide are taking a more proactive role, assessing not just the immediate impact of a deal but its potential to create future market dominance. In the UK, the Competition and Markets Authority (CMA) and other bodies now scrutinise proposed transactions with greater rigour. This heightened examination means more documentation, possible remedies to address anti-competitive concerns, and often prolonged approval processes.

The Growing Importance of ESG

ESG considerations are front and centre for investors and buyers. Companies with a solid track record in environmental management, social responsibility, and good governance practices can command stronger interest and higher valuations. However, the ESG due diligence process is intricate. Buyers may need to review carbon footprints, labour practices, supply chain sustainability, and community impact, all of which add time to the negotiation and closing stages.

Opportunities Amid the Complexity

Despite these challenges, the current M&A market still offers compelling opportunities—especially for SMEs that are well-prepared.

Technological Innovations in Due Diligence

Emerging technologies, including AI-driven data analysis tools, can streamline the due diligence process. These tools help buyers sift through large volumes of financial and operational data faster and more accurately than manual methods, potentially shaving days or even weeks off a transaction. While deals are generally taking longer, SMEs that have clean, well-organised data and embrace digital tools can differentiate themselves, making the process as efficient as possible.

Sector-Specific Resilience

Some sectors fare better than others in the current climate. Service-based industries—such as professional services, financial services, and software solutions—tend to face fewer regulatory hurdles and can adapt more quickly to changing market conditions. By contrast, heavily regulated or capital-intensive sectors, like energy or certain parts of manufacturing, may find transactions more complex and time-consuming. SMEs in more agile service sectors can leverage this advantage and potentially close deals more swiftly.

Private Equity Activity and Strategic Buyers

Private equity firms, though more cautious, remain interested in quality assets that demonstrate resilience and growth potential. Similarly, strategic buyers looking to strengthen their market position may be open to acquiring SMEs that help them expand capabilities, enter new geographic markets, or access unique intellectual property. While valuations may be lower than at the height of the M&A boom, buyers and sellers can still find common ground—especially if sellers are realistic about pricing and ready to consider creative deal structures such as earn-outs or minority stake sales.

Cross-Border Transactions

The UK’s position as a gateway to European markets, along with its reputation for stable corporate governance, can appeal to international buyers. Currency fluctuations may also work in a seller’s favour if a relatively weaker pound makes UK businesses more affordable to foreign investors. For SMEs that have a strong export story or distinctive products and services, this can attract interest from overseas acquirers looking to establish a UK foothold.

What This Means for UK SMEs

For UK SME owners contemplating a sale, raising capital, or making an acquisition themselves, today’s M&A environment rewards preparation, flexibility, and strategic thinking.

Realistic Valuation Expectations

Gone are the days when sellers could expect top-of-market multiples without question. With interest rates high and buyers scrutinising every detail, valuations must be grounded in realistic assumptions. This doesn’t mean selling at a bargain; it means ensuring that your financials, growth projections, and narrative genuinely support your asking price. Being open to deal structures that bridge valuation gaps—such as contingent payments or earn-outs—can also help secure a favourable deal.

Proactive ESG and Compliance Measures

SMEs that want to stand out can get ahead of ESG due diligence by proactively establishing and documenting their sustainability and governance practices. Having a clear ESG strategy, transparent supply chain reporting, and solid human resource policies can make your business more appealing. Similarly, ensuring compliance with all relevant regulations, including anti-money laundering, GDPR, and sector-specific rules, will reassure buyers and potentially speed up approval processes.

Clear Strategic Vision

In a cautious market, buyers gravitate toward targets with a strong strategic story. SMEs should be prepared to articulate not just their current performance but their future growth trajectory. How do you plan to scale? What new markets or product lines are on the horizon? A compelling vision backed by data, market research, and a coherent business plan can instill confidence in potential buyers or investors, potentially shortening the due diligence phase.

Choosing the Right Advisors

The complexity of modern M&A makes experienced advisors indispensable. Working with corporate finance professionals who understand the SME landscape and can navigate the interplay of valuation, regulatory hurdles, and ESG considerations is crucial. Advisors can help streamline the data room, highlight growth opportunities, and structure the deal to meet both parties’ goals. The right guidance can be the difference between a stalled transaction and a smooth close.

Looking Ahead: A Market in Transition

As we look toward 2025 and beyond, the M&A market is likely to remain complex but gradually more predictable. Some of today’s challenges—such as rising interest rates and rigorous regulatory scrutiny—aren’t going away overnight. However, greater familiarity with ESG standards, improved technology tools for due diligence, and market participants’ growing sophistication may help streamline certain aspects of the process over time.

For SMEs, this evolving environment presents both hurdles and opportunities. Those who invest in operational improvements, robust governance, and strong ESG credentials will be better positioned to command attention from quality buyers. Meanwhile, businesses that leverage sector strengths and embrace digital transformation in their internal processes can stand out in a crowded marketplace.

Self-Assessment: Is Your Business Ready for M&A?

If you’re considering an M&A transaction, it’s wise to conduct a brief readiness check:

1. Financial Health: Are your financial records accurate, audit-ready, and capable of withstanding heightened scrutiny?
2. ESG Preparedness: Have you documented your ESG policies and metrics, demonstrating a commitment to sustainability and responsible governance?
3. Regulatory Awareness: Are you aware of the regulatory hurdles relevant to your industry and prepared to address them proactively?
4. Strategic Narrative: Can you clearly articulate your company’s growth story, target markets, and long-term vision to potential buyers or investors?
5. Advisory Support: Do you have the right advisors on hand—corporate finance experts, lawyers, and tax specialists—who can guide you through complex negotiations?

By taking the time to answer these questions and address any gaps, you can enhance your company’s attractiveness and reduce time-to-close, even in a market where the average deal now takes 258 days.

Final Thoughts

The M&A market of 2024 is defined by complexity but also by opportunity. While heightened regulatory scrutiny, costlier financing, and ESG considerations have slowed the pace of dealmaking, quality assets continue to attract interest. For UK SMEs willing to adapt, prepare thoroughly, and embrace strategic thinking, the current climate can still yield rewarding outcomes.

At Branta, we specialise in helping SMEs navigate this challenging environment. Whether you’re looking to sell, raise capital, or grow through acquisition, our team has the expertise to guide you through each stage of the process. Contact us today to explore how we can support your objectives and help position your business for success in the evolving M&A landscape.