In June, the volume of mergers and acquisitions involving UK businesses plummeted to its lowest point in four years, signaling a slow rebound in business confidence.

Data from the Office for National Statistics indicates a significant 16.8% decline in deals, dropping from 463 to 385 during the three months leading up to the end of June. The market for mergers and acquisitions saw a sharp decrease in monthly transactions, with totals falling from 148 deals in April to just 93 in June, the lowest monthly tally since May 2020.

Total transaction values also experienced a downturn, decreasing from £11.8 billion to £13.8 billion compared to the first quarter, as both domestic and international deal values dropped by £1 billion each.

Among the domestic engagements, notable transactions included Compass Group’s acquisition of CH&CO for £475 million. In the international sphere, US firm GXO Logistics acquired logistics company Wincanton for £762 million.

Caroline Rae, a partner at law firm Herbert Smith Freehills, remarked, “The UK mergers and acquisitions landscape for the second quarter of 2024 is underwhelming yet unsurprising, largely due to the political uncertainties related to the impending general election. Nevertheless, there is cautious optimism that activity may rebound towards the year’s end as the economic outlook stabilizes.”

Katherine Moir, a partner at Clifford Chance, expressed expectations for a rise in inward M&A activities as economic conditions normalize. She noted that future transactions may be driven more by strategic goals rather than opportunistic buys, especially from foreign investors eyeing the UK’s long-term growth potential.

Recent proposals by the Labour government for tax increases have sparked rumors of a surge in deal finalizations to circumvent potential hikes in capital gains tax on business sales.

James Wild, head of M&A at consulting firm RSM UK, stated, “Business owners are now focused on the impending autumn budget and the potential increase in capital gains tax, prompting sellers to expedite deals. Consequently, we anticipate a genuine uptick in deal-making activity in the latter half of the year.”