If you’re an owner-manager considering the sale of your business, the latest data from the Office for National Statistics (ONS) on UK mergers and acquisitions (M&A) for Q4 2024 (October to December) offers some valuable insights.

Released earlier this week, the bulletin highlights the impact of tax policy on deal making, but also the continuation of a robust underlying market.

The ONS reports a provisional total of 402 domestic and cross-border M&A transactions in Q4 2024, a drop of 62 from the previous quarter’s 464. This decline is likely budget-related. A rush to get deals done in October and beat the CGT increase saw 186 get over the line (and no doubt the previous quarter also benefited from a "budget bounce" for those slightly ahead of the curve).

Only 65 deals got done in December. Despite being a shortened working period, December traditionally holds up as deal makers battle the dreaded psychological dead line of "completing this year". What’s more, the remaining 151 deals happening in November might represent some poor souls that missed the October deadline and had to pay the additional 4% CGT. We predict another weaker Q1 2025 (January to March) for exactly the same reasons: deal makers will have emptied the cupboard somewhat at the back end of 2024 and are now in the the mode of pipeline building again ready for the rest of the year.

On a brighter note, the value of domestic M&A (UK companies acquiring other UK firms) jumped to £8.6 billion, up £6.7 billion from Q3 2024. This surge indicates a robust appetite for smaller, local deals, which often dominate the lower mid-market. If your business fits this profile, you can take some comfort in the fact that there remains a strong domestic market. However, the provisional nature of these figures (subject to revision) advises caution; so don’t rush without a clear strategy.

For owner-managers, the implications are twofold. First, timing is critical. The current drop in transaction volume gives an opportunity in a quieter market to sand out, especially if you have strong financials and a compelling growth story. But buyer selectivity and general caution in light of bearish economic backdrop will bring about greater buyer scrutiny.

Second, valuation expectations may need tweaking. The last thing any buyer is willing to do is overpay when headwinds are looming on the horizon and it’s true that some of the heat that we have seen in recent years has certainly come out of the market.

Ultimately, if you’re contemplating a sale, now’s the time to polish your business’s appeal - streamline operations, boost profitability, and target buyers who value your niche. The lower mid-market remains active, but success hinges on top quality preparation in a tightening landscape.

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Jim Shaw is Founder & CEO of Shaw & Co

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If you'd like to discuss how Shaw & Co can help you sell, buy or fund the growth of a business, please book a meeting here

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