UK CEOs target M&A activity for growth

by Ken Walsh Head of Deals, PwC United Kingdom


One month in and 2020 shows no signs of slowing down. Despite external challenges and ongoing uncertainty, the transactions market has remained active.

Mergers and acquisitions (M&A) could provide the answers to some of the biggest worries flagged by CEOs in this year’s survey: economic uncertainty, the speed of technological change and skills shortages. So it’s encouraging to see that a third of UK CEOs are eyeing M&A activity in the coming year.

In PwC’s 23rd CEO Survey, UK business leaders singled out uncertain economic growth as their key concern, but signalled that M&A activity forms part of their plans to overcome it.

With 42% of UK CEOs planning to enter new markets and 65% identifying new products and services, M&A could also play a key role in the growth agenda. This reflects the findings in our Creating value beyond the deal report, a survey of 600 dealmakers carried out in 2019, which found that market expansion is one of the top two triggers for M&A in most sectors, with consumer markets and technology, media and telecommunications (TMT) out in front.

Looking ahead, there has never been a more important time for organisations to think about deal making more strategically. M&A can hold the key to many issues - from helping companies grow to managing the impact of technology and shifting skills needs.

Our CEO Survey underlines the impact, with around three-quarters of UK business leaders identifying skills shortages (79%) and the pace of technological changes (75%) as threats to their growth prospects. Nearly two-thirds (64%) also cite changing consumer behaviour as a concern.

Yet, with threats come market openings, with M&A offering a potentially fast and effective way to gain access to the latest technology and talent. Our CEO Survey highlights the growing focus on climate change. Targets are likely to include businesses with specialist technology and expertise in sustainability.

Post-deal planning and integration should pay close attention to talent retention issues when acquiring businesses with different cultures. Some 65% of dealmakers in our Creating value beyond the deal research report cited that cultural differences impacted the realisation of deal value. The results of the CEO Survey supported this with more than half of UK business leaders (59%) citing the declining wellbeing of the workforce as a threat to their growth prospects.

Our conversations with corporate and private equity executives show that companies that genuinely prioritise value creation early on - rather than those that assume it will happen naturally as the transaction proceeds - have a better track record of maximising value in a deal.

Visit PwC’s 23rd CEO survey to find out what else is on the mind of UK CEOs.
And for more on Creating value beyond the deal read our research report now.

by Ken Walsh Head of Deals, PwC United Kingdom