Many of the characteristics from 2022 have swept into the first quarter of this year, suggesting that a period of continued uncertainty will be with us for at least the remainder of 2023. While the U.K. – and many other nations around the globe – wrestle with the disruptive headwinds of persistently high inflation and pronounced interest rates, it is anticipated that a period of increased disruption is likely in many industries.
Companies in consumer-facing sectors in particular may feel the pinch of contracting consumer confidence and disposable income while simultaneously struggling to manage their own cost bases. Any levels of optimism will largely be set – and sustained – by hard evidence of a return to economic stability. With the cost of servicing debt substantially higher than 12 months ago, companies will be pulling all available levers to control costs, carefully manage cash and reach a point where growth again becomes the priority.
The latest edition of AlixPartners' bi-annual Mid-Market Debt Report covers more than 75 bank and non-bank lenders active in the UK and European mid-market (debt transactions valued up to €400 million).
AT A GLANCE:
- Given renewed market volatility post-COVID in the shape of inflation and interest rate rises, H2 2022 M&A transaction volumes were down 15% compared to H1.
- A return to stability in 2023 will be vital in providing the platform that the market needs, especially given the huge amount of dry powder still to be deployed by Private Equity.
- Debt costs remain high, and with an uncertain economic outlook, there are reasons to expect PE M&A activity to remain dampened, reducing the likelihood of an uptick in LBO deals and potentially giving corporate buyers an advantage in H1 2023.
- This may lead to more bank-led deals ahead, given relationship banks have found their services regularly called upon during H2 2022 in these volatile times. This is particularly likely given that we expect refinancing activity (and A&E solutions) to be pursued as maturities approach.
Read the full report below: