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The M&A market is considered reasonably resilient when it comes to global economic conditions, particularly in the private equity (PE) space. The global pandemic did little to alter this perception, with 2021 being a record year in terms of value and volume. 1 However, 2022 then saw a 36% slump in global deal activity compared to the year before,2 barely limping into Q4. The PE market faired only marginally better, with the total value of deals down 6% in 2022 (compared to 2021).3

So, with ongoing market uncertainty, supply-chain issues and predictions of another recession, can we expect the PE industry to regain its composure and lead the charge for M&A deal activity for the rest of this year and into 2024?


Last year proved that despite global adversity, PE funds still have the ability to amass considerable war chests compared to their corporate counterparts.4 However, this does not guarantee ROI. For a bullish PE landscape to emerge in 2023, funds must be more creative and committed to their values and responsibilities in three distinct areas to maintain a competitive advantage.

1. Sustainability

Sustainability will continue to be a key focus for investors. In an era of growing scepticism around commitments to ESG, the most successful firms will need to pay close attention to this and the wider messaging they send out to investors. Funds will need to prioritise the necessary framework to implement their ESG strategies at an operational level, particularly as many have expressed the desire to accelerate their ESG policies beyond 2023. For these initiatives to be successful with tangible outputs, PE funds will need to be transparent and committed to verifiable industry standard measurements, highlighting that ESG initiatives are delivering on their promises. This is crucial not just for the funds, but also to a wider audience of stakeholders and regulators.

2. People and talent

Talent has always been a key component of any M&A strategy, but organisations will have to be more creative in how they structure their leadership teams. They will also need to consider diversifying talent to achieve optimal impact – whether through seeking external advice or diversifying the current talent pipeline. This is particularly relevant when considering the specific skillsets and backgrounds required from individuals to achieve competitive advantage with sustainability and digital transformation.

3. Digital transformation

Digital transformation will continue to be a core focus in an increasingly competitive market as companies seek to diversify their portfolios. Customers are expecting more and more from digital experiences, while businesses want higher value from new products or markets enabled through digital transformation. Looking inwards, a good fund or corporate should constantly reassess their metrics, while continually striving for improved data and insight functions to drive efficiencies and cost reductions.

“While the macroeconomic situation will continue to impact the M&A landscape, I nonetheless expect to see plenty of upcoming activity and undoubted opportunity. Market trends are accelerating companies into new areas of expertise and focus, so whether they’re looking to enhance their sustainability efforts, their digital offering or seek rapid growth – there will be plenty of deals out there to be made, both for private equity firms and the corporate market.”

Jon BregerM&A Lead, Gate One


2023 has seen mixed financial messages for the market, whether it is economists flirting with recession or changing economic narratives from central banks and regulators. While this level of uncertainty is likely to stay for some time, there are pain points in the M&A landscape that could now be interesting areas of investment for PE firms, depending on their appetite for risk.

Supply chain concerns

Most UK businesses over the past 12-18 months have had their supply chains disrupted in some way, knocking both consumer and market confidence. PE, however, has been quick to capitalise on this opportunity. Globally, PE-backed transportation and logistics deals accounted for US$84.7 billion of deal value in 2022.5 Firms have been keen to invest in warehouse automation and key logistical operations, which have been significantly affected by post-Brexit labour shortages. On the flip side, this isn’t an area of investment that has yielded much success for PE firms in the past – it had slow growth rates compared to other sectors and there is a small talent pool of sector specialists who can implement tangible change. Despite this, it represents a real opportunity with the increasing focus on strong supply chains and logistics operations this year – but the crucial factor will be attracting the right people to advise on it.

Bolt-on acquisitions

We may see the continued rise in bolt-on acquisitions as PE funds look to consolidate and merge their existing portfolios due to rising inflation, which has reduced valuation multiples. Linked to supply chain concerns, funds should start looking at onshoring their business processes, which would support the existing portfolio by providing resilience and in-house expertise in the short to long term. Ideally, this would involve finding low risk target companies, whose activities can be integrated into the portfolio with little disruption to day-to-day activities. It will be interesting to see if this becomes a key investment strategy for funds, but crucially this will always hinge on a robust and structured integration process.

The growing emergence of the lower mid-market space

Rising inflation affects all aspect of the economy and PE is no exception. Stricter underwriting standards are a consequence of rising inflation, making it more challenging and, importantly, expensive to finance large-cap deals.6 Smaller deals are far more feasible in this regard – ROI will obviously be smaller, but there is less financial risk associated to them. Whether large-cap funds adapt their investment strategy to be more susceptive to deals in the c.£100m space is yet to be seen, or perhaps we will see mid-market funds continue to expand and capitalise on this area.


There is no clear answer as to what awaits the M&A market over the coming 12-18 months, perhaps the only certainty is uncertainty itself. If anything, the core foundational pillar stones of sustainability, people and talent, and digital transformation should continue to be at the heart of any successful M&A deal whether PE or corporate. If a business can keep these factors front of mind throughout the deal lifecycle, then the next few years could look promising.

Jon Breger
Rory Miles

If you’d like to find out more about how to prioritise your sustainability, people or digital transformation during M&A activity, please get in touch.

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