More than half of UK organisations view transactions as the best way to keep up with market changes - PwC UK Survey

More than half (56%) of firms in the UK view transactions - in the form of M&A, divestments, joint ventures or minority stakes - as the best way to keep up with the changing business landscape and secure their long-term viability, according to a new PwC report.

Time to go further, faster: Transacting to create value and accelerate transformation surveyed 300 UK senior executives with company revenues of $100m upwards across six different industries on their plans to use transactions to drive transformation and create value. 

The stakes are high for many organisations as they seek to create value and keep up with the rapid advancements in technology such as Generative AI (GenAI) while making progress on Net Zero ambitions. More than a third (35%) believe their business won’t be economically viable if they don’t make significant changes within the decade.

To keep up with their markets, 63% of senior leaders say they’ll be conducting coordinated, strategic change within the next three years. They’re aware that organic development is no longer sufficient and largely believe transactions must play an instrumental role in enabling transformation at pace.

Our research finds that businesses whose transactions have exceeded their expectations are more likely to have adopted an approach with a clear vision - a transformative intentionality - behind their activity. 

Roberta Carter, UK Value Creation Leader at PwC UK, said: 

“In a market where competitiveness relies on agility, businesses must make transactions an integral part of their transformation strategy. They need to adapt at speed, but organic growth often loses momentum when set against the demands of day to day business operations. To create the most value, leaders must align transactions with a bold vision. Deals that support the business’s ability to continuously adapt are more likely to succeed. By carrying out transactions and transformation simultaneously, leaders can establish a virtuous cycle whereby both activities unlock more value.”

Transacting to create value

The survey highlights three kinds of value businesses are primarily trying to create through transactions in the next three years. Stronger ESG performance is one, with almost three quarters (72%) saying they are likely to use transactions to help reduce emissions and meet their Net Zero commitments. The findings also show that companies are more likely to approach this ambition by divesting businesses rather than acquiring new capabilities.

The research suggests that technology transformation is also a key driver of transactions. Particularly accelerating the integration of technology and technology-enabled processes which are now becoming even more important. Seven in 10 respondents say they are likely to use transactions to achieve their technology related goals for their businesses. 

Talent is the third lever. According to the survey, six in 10 (60%) say they are likely to use transactions to help them build a workforce with future-ready skills, while 44% acknowledge that deals enable companies to acquire capabilities and skills. 

Scale of transactions

While the sentiment towards transactions is largely positive, the scale of planned transactions vary. Almost a third (31%) say they expect to carry out a number of small-scale transactions. Just over a quarter (26%) say their approach will be a combination of larger and smaller transactions, and 15% say they would look to a number of larger scale deals. From an industry perspective, both Energy, Utilities and Resources and Health and Pharma (62%) say they will carry out one large-scale deal, a number of large-scale deals, or a mix or large and small deals - with the effect that they will be doing large deals within three years - and this is higher than the other industries in the survey.

Lucy Stapleton, Head of Deals at PwC UK, said: 

“There are signs that conditions in the deals market are beginning to stabilise particularly in sectors aligned with the megatrends such as energy transition, healthcare and technology where companies are making transformative transactions. As conditions continue to improve and confidence grows, we expect to see a growing number of companies using transactions as a way to transform their businesses.”

Securing value post transaction

Respondents completing transactions were asked about their recent experience of doing so, with half (50%) saying results exceeded their expectations. In further analysis of Total Shareholder Return (TSR) created by companies doing deals, the findings were divided evenly with as many outperforming or underperforming their industry benchmarks.

The research also includes interviews with private equity (PE) firms and for them, transformation is a key part of the value plan after a transaction, which may mean higher investment and potentially longer hold times. Nonetheless, the previous model in PE of generating returns through leveraged finance is less attractive than it was, meaning firms must find new ways to create value for their investors.

Roberta Carter concluded:

“While many businesses will have their internal transformation plans, using transactions can help accelerate these, creating faster value delivery. This requires a holistic approach, using both organic and inorganic efforts aligned around a consistent strategy. Considering the relatively high rate of businesses doing deals and experiencing a negative impact on TSR, it also means ensuring that the deals businesses pursue are executed with rigour all the way through to value delivery. Failing to transform could have drastic consequences, but transaction boosted transformation can drive sector leading success.”

Ends

Notes to editor

The Time to go further, faster: Transacting to create value and accelerate transformation report surveyed 300 UK senior executives, each of who play a key role in their firm’s transaction activity. The report also draws on wide ranging discussions with senior executives working on industry-shaping deals.

TSR (Total Shareholder Return) desktop research on 250 acquisitions with a deal value greater than £100m completed between 2018-21 by listed companies in the UK and Europe. TSR has been calculated as the difference between organisation TSR and industry index from deal announcement to 12 months post deal close.

A series of in-depth interviews with senior leaders in the M&A industry