M&A in the UK and cross-border transactions in 2024: key trends and challenge

The mergers and acquisitions (“M&A”) landscape in the UK and cross-border transactions in 2024 reflect both opportunities and challenges.

The interplay of post-pandemic recovery, geopolitical tensions, regulatory changes, and ESG (“Environmental, Social, and Governance”) concerns has shaped how businesses approach M&A deals.

The UK’s position as a global financial hub, along with its exit from the European Union, continues to influence the direction of cross-border transactions, with both domestic and international players navigating new regulatory environments and market conditions.

Since the UK’s departure from the EU, businesses have been adjusting to new trade agreements, supply chain disruptions, and regulatory frameworks. However, 2024 is set to witness a more settled post-Brexit M&A environment.

The UK government has sought to strengthen trade relationships with non-EU countries, such as the US and Commonwealth nations, which has created new opportunities for cross-border M&A.

Non-EU investors are increasingly eyeing the UK for strategic acquisitions, especially in sectors like technology, pharmaceuticals, and financial services. These industries are benefiting from the UK’s strong intellectual property laws, robust financial infrastructure, and innovative research and development sectors. However, potential buyers must also consider the evolving UK competition law and national security regulations, which have been increasingly scrutinising foreign investments in sensitive industries.

The US remains a dominant player in UK M&A, and 2024 is expected to see further deepening of the US-UK dealmaking relationship. Recent regulatory clarity around Brexit has encouraged US firms to invest more heavily in the UK, viewing it as a gateway to the European and global markets. Technology and life sciences are key sectors where US-UK M&A activity is expected to thrive.

The UK’s stable legal system, coupled with a favourable corporate tax regime, makes it an attractive destination for US investors. At the same time, UK firms are also looking across the Atlantic for strategic partnerships and acquisitions. Cross-border collaboration between tech firms and financial service providers in areas like fintech, cybersecurity, and artificial intelligence is expected to increase, supported by governmental efforts to align transatlantic data and digital trade policies.

The impact of ESG

ESG factors are now integral to the M&A decision-making processes in the UK. Investors are increasingly focusing on sustainability and ethical business practices when evaluating acquisition targets.

Companies that demonstrate a commitment to reducing their carbon footprint, improving social diversity, and maintaining high governance standards are more attractive to buyers.

In 2024, cross-border deals, particularly with European partners, will see a continued focus on ESG due diligence. The EU’s Corporate Sustainability Reporting Directive (“CSRD”), which affects both EU and non-EU companies with significant EU operations, is likely to influence UK-based companies involved in cross-border transactions.