Market View: The first mergers & acquisitions of 2023

Early into 2023, we are seeing some early years consolidators firmly taking a more considered and selective overall approach to M&A (mergers and acquisitions) than in the past. While pricing this year should inevitably cool somewhat against the previous two years, there is an element to which the market is beginning to bifurcate – ‘more attractive’ businesses which are still commanding high interest and valuations, and nurseries/groups which are more challenged and getting lower ‘distress’ pricing. The latter group also often have structural issues which make them less ‘attractive’ to buy for the main consolidators.

It's not quite as simple as that, however. On the one hand, there is at least one ‘blockbuster’ sale/ investment process expected in Europe in the first half of this year, which could significantly buoy interest/activity and pricing across the whole sector – what's often described as a ‘halo effect’. On the other hand, the challenge and uncertainty across the sector on staffing, cost inflation and elasticity of demand in the context of the current economic environment and price, increases needs to continue to be factored in by buyers. None of these are issues which will resolve easily or quickly.