(London, UK – Decemver 16, 2023) — In a recent report by PwC UK titled “Time to go further, faster: Transacting to create value and accelerate transformation,” it was found that 56% of UK firms consider transactions, including M&A, divestments, joint ventures, or minority stakes, as crucial for adapting to the evolving business landscape. The survey involved 300 senior executives from various industries, with 35% expressing concerns about their business’s economic viability without significant changes within the next decade.
The study underscores the increasing importance of transactions in responding to technological advancements like Generative AI (GenAI) and meeting Net Zero goals. Over 63% of leaders plan to initiate coordinated, strategic changes in the next three years, recognizing the necessity of transactions for rapid transformation.
Businesses with successful transactions often have a clear vision, described as transformative intentionality, guiding their activities. According to Roberta Carter, UK Value Creation Leader at PwC UK, transactions need to be an integral part of a business’s transformation strategy to adapt quickly to market demands.
Creating Value Through Transactions
The report outlines three main areas where businesses aim to create value through transactions in the next three years. Approximately 72% plan to enhance ESG performance by reducing emissions and achieving Net Zero commitments, often through divesting businesses. Technology transformation is another key driver, with 70% intending to use transactions to accelerate the integration of technology and tech-enabled processes. Talent development is the third lever, as 60% aim to build a future-ready workforce, and 44% view deals as a means to acquire capabilities and skills.
Scale of Transactions
While sentiment towards transactions is positive, the scale varies. About 31% expect to conduct small-scale transactions, 26% a combination of larger and smaller transactions, and 15% are considering larger-scale deals. Industries like Energy, Utilities, and Resources, along with Health and Pharma, are more inclined to pursue large-scale deals, signaling sector-specific trends.
Securing Value Post-Transaction
Half of the respondents reported that recent transaction results exceeded expectations. However, analysis of Total Shareholder Return (TSR) indicated mixed outcomes, with companies either outperforming or underperforming their industry benchmarks.
Private Equity Perspective
The report also includes insights from private equity (PE) firms, highlighting transformation as a crucial aspect post-transaction. PE firms are adjusting their models, moving away from leveraged finance and focusing on new strategies to generate value for investors.
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.”
Roberta Carter emphasized the need for a holistic approach, combining organic and inorganic efforts aligned with a consistent strategy for successful transformation. The report suggests that failing to transform could have drastic consequences, emphasizing the importance of rigor in executing deals through to value delivery. (GT)
