Consulting firms maintain 'cautious optimism' on 2023 M&A market

21 February 2023 5 min. read

Following a record year, the 12 months of 2022 saw a fall in the volume and value of M&A activity. However, even as private equity activity further slows, two major consultancies have suggested that a rebound could be on the cards.

Mergers and acquisitions (M&A) are big business for consulting firms. Financial advisory work, including deals and corporate finance consulting, makes up about 15% of the UK professional services sector’s revenues. Globally, a recent study from Research from Markets suggested that the market for M&A advisory could hit a size of $30.5 Billion by 2027, growing at a CAGR of 2.8% until then. As such, consulting firms have a keen interest in showing their prowess in the space. At the turn of each year, this sees consultancies of all shapes and sizes provide their takes the twists and turns of the global deals market.

2022 was something of a come-down for the market, as has already been covered by research from – among others – WTW and EY – with volume and value both tumbling from the previous record-setting 12 months. While these more general overviews of the market suggested the coming year might struggle to live up to 2021 too, more specific insights from firms like Hampleton Partners showed that particular markets such as the HR technology space showed signs of growth. In particular, this was buoyed by a resurgence of interest from private equity investors.

Consulting firms maintain 'cautious optimism' on 2023 M&A market

Now, Big Four rivals PwC and KPMG have also issued their verdicts on the past year, as well as reading the tea-leaves for the coming months. Looking specifically at the UK market, both firms’ respective sooth-sayers found causes for ‘cautious optimism’ in the coming period.


PwC noted that 2022 saw 4,232 deals – a 16% decline from the 5,033 of the previous year. While this was broadly in line with global trends, the fall was slightly less than the world-wide average of 17%. Deal value endured a much deeper drop, however, tumbling by 56% from £332.1 billion to £144.9 billion.

However, PwC found that specific segments did see a strong performance. The industrial, manufacturing and automotive market saw the most activity, accounting for a quarter of the total output 2022. Meanwhile, the financial services industry saw deals with the highest value in 2022 making up almost a quarter of total deal value with £36 billion worth of transactions – followed by industrial, manufacturing and automotive at £29 billion, and technology, media and telecommunications with £28 billion. Looking ahead in 2023, as private equity firms weigh up which fundamentals are best suited to strengthen their portfolios from economic uncertainty, PwC suggests this may see a further uptick in activity.

Lucy Stapleton, Head of Deals at PwC UK, explained, “While deal volume slowed down last year, sentiment around M&A is still cautiously optimistic for the year ahead. We are seeing companies are still very much on the lookout for opportunities to transact to transform their business. Private equity is still sitting on a lot of dry powder. The mix of increased certainty and valuation recalibration, coupled with signs that inflation may have peaked and that interest rates could start to stabilise or rise in much smaller increments, mean this could be the catalyst for greater certainty in the deals market and for the big ticket activity in the UK to kickstart.”


This ‘cautious optimism’ was echoed by experts from KPMG – albeit for different reasons. Focusing on deals involving private equity itself, KPMG found that the record deal activity of 2021 was not lived up to in the last year. The total value of deals went down by 6% from £180 billion in 2021 to £170 billion in 2022. Volumes decline quicker though, shrinking 16.5% from 1,850 in 2021 to 1,544 in 2022 – suggesting that rather than being unwilling to spend at all, private equity firms are simply having to be more selective.

Rob Baxter, Head of KPMG UK’s Corporate Finance practice, remarked, “After a record year of dealmaking activity in 2021, it was perhaps inevitable that the market would begin to normalise. 2022 began on a strong footing with significant activity in the first quarter before economic and geopolitical headwinds began to gather pace… However, the decline in deal values and volumes was far less dramatic than many expected, and the mid-market Private Equity market proved more resilient than the overall Private Equity market. Unlike some larger deals, the mid-market is typically not dependent on multi-bank debt solutions supporting large debt packages, reducing some of the impact of the travails of the lending market.”

With that in mind, KPMG suggested some resilient sectors were likely to prove ‘safe bets’ for investors in the coming months – and therefore see heightened activity, even as other areas slow. In particular, the experts noted that healthcare saw a noticeable spike in demand through 2022, with the volume of deals up almost 38% and value up 47% on 2019’s figures. As the pandemic continues to weigh on the underfunded NHS, and waiting times remain at decade-long highs, there is a growing demand among patients desperate for treatment turning to private-pay providers. With these pressures seeming unlikely to end any time soon, private equity firms will continue to see such firms as key opportunities.