UK mergers and acquisitions activity declines in Q4 2024, but domestic deals surge

The UK’s mergers and acquisitions (M&A) activity declined in the fourth quarter of 2024, reflecting a slowdown in overall deal volume, particularly in cross-border transactions. The total number of completed M&A transactions involving UK companies fell to 402, down from 464 in Q3 2024, marking a noticeable dip in activity. Monthly figures further illustrate this downward trend, with 186 deals in October, 151 in November, and just 65 transactions in December. This decline signals a cautious approach from investors amid economic uncertainties, financing constraints, and high borrowing costs.

Despite the overall slowdown, domestic M&A transactions—where UK companies acquire other UK-based businesses—saw a significant rise in value. The total worth of these deals surged to £8.6 billion in Q4 2024, a sharp increase of £6.7 billion compared to Q3 2024 (£1.9 billion). This is the highest quarterly value since Q2 2021, indicating that domestic businesses are focusing on strategic acquisitions within the UK market rather than expanding abroad.

Two major domestic acquisitions contributed to this surge: Nationwide Building Society’s acquisition of Virgin Money UK Plc and Barratt Developments Plc’s takeover of Redrow Plc. These high-profile deals highlight continued confidence in the UK financial and real estate sectors, despite broader economic challenges. The rise in domestic transactions suggests that businesses are leveraging consolidation opportunities and looking to strengthen their market positions in a competitive landscape.

Decline in Outward and Inward M&A Activity

While domestic M&A showed resilience, cross-border transactions involving UK companies declined significantly. Outward M&A, which includes UK companies acquiring foreign businesses, saw a drop to £1.4 billion in Q4 2024, a £2.5 billion decrease from Q3 2024 (£3.9 billion). This marks the lowest level of outward investment since Q3 2013, indicating a slowdown in international expansion plans by UK firms.

The decrease in outward M&A can be attributed to global economic uncertainties, currency fluctuations, and higher costs associated with overseas acquisitions. Many UK companies have opted to prioritize stability within their domestic operations rather than pursue riskier international deals. The combination of inflationary pressures, geopolitical tensions, and fluctuating interest rates has contributed to this more conservative investment approach.

Similarly, inward M&A activity, which involves foreign companies acquiring UK businesses, also experienced a sharp decline. The total value of these transactions fell to £4.5 billion in Q4 2024, a significant £5.9 billion drop from Q3 2024 (£10.4 billion). Foreign investors have become increasingly cautious about entering the UK market due to uncertainty surrounding economic growth, regulatory changes, and ongoing financial market volatility.

The slowdown in inward M&A suggests that the UK is facing stronger competition from other global markets in attracting foreign investment. While the UK remains a key destination for international business, investors are carefully assessing market stability, taxation policies, and long-term growth prospects before committing to large-scale acquisitions.

Market Conditions and Business Sentiment

The Bank of England’s quarterly business report provided further insights into the investment landscape. The report indicated that business investment intentions remained weak, with many companies adopting a wait-and-see approach due to ongoing economic uncertainties and financing challenges. While some firms are looking to increase investment in 2025, the majority remain cautious, particularly in sectors affected by high capital expenditure costs, limited access to credit, and squeezed profit margins.

Larger corporations continue to have better access to financing, as banks compete to lend to financially stable, creditworthy businesses. However, small and medium-sized enterprises (SMEs) are struggling to secure funding, often turning to secondary lenders or alternative financing options. Startups and early-stage companies face even greater challenges, as many do not meet the stringent credit criteria set by major banks.

Despite these headwinds, some sectors have demonstrated resilience, particularly in financial services and real estate, as evidenced by the major domestic M&A deals in Q4. While businesses remain cautious, there is potential for an investment rebound in 2025, particularly if economic conditions improve and financing becomes more accessible.

Outlook for 2025

Looking ahead, the UK’s M&A landscape will likely be shaped by macroeconomic trends, including interest rate movements, investor sentiment, and global market stability. While domestic transactions have shown strength, the slowdown in cross-border M&A raises concerns about the UK’s attractiveness as an investment destination. The decline in foreign acquisitions of UK businesses suggests that investors are closely monitoring post-Brexit economic policies, regulatory developments, and overall market stability before committing to deals.

If economic conditions improve in 2025, the volume of transactions could see a rebound, particularly in sectors that have demonstrated strong underlying fundamentals. However, higher financing costs, inflationary pressures, and geopolitical uncertainties will remain key factors influencing investment decisions.

While some businesses are seizing M&A opportunities to strengthen their market positions, others are adopting a more cautious approach, delaying major acquisitions until economic conditions become more favorable. The balance between risk and opportunity will determine how the UK’s M&A activity evolves in the coming quarters.

Source: ONS

APAC commercial real estate stabilizing in 2025, but office sector faces challenges

The Asia-Pacific (APAC) commercial real estate market is poised for stabilization in 2025, driven by resilient economic growth and evolving investment trends. However, the office sector faces challenges due to an oversupply of space and shifting workplace dynamics.

According to CBRE’s 2025 Asia Pacific Real Estate Market Outlook, the region’s GDP is projected to grow by 4.1%, slightly above the previous year’s 3.9% expansion. This economic stability is expected to bolster investor confidence, with commercial real estate transaction volumes anticipated to rise between 5% and 10% year-on-year.

Despite this positive outlook, the office sector presents a mixed picture. Cushman & Wakefield forecasts robust demand, averaging 75 million square feet annually over the next few years. However, an influx of new supply—exceeding 100 million square feet between 2025 and 2027—is projected to push regional vacancy rates close to 20%.

Employment growth, particularly in white-collar sectors such as technology, professional services, and financial services, is expected to drive office space demand. These industries are projected to add approximately 2.8 million jobs in 2025, accounting for over half of the new white-collar positions in the region.

In response to evolving tenant preferences, there is a growing emphasis on upgrading office spaces to premium standards. Factors such as sustainability, environmental, social, and governance (ESG) compliance, and mandatory stock market regulations are driving sustained demand for ESG-compliant office spaces.

Overall, while the APAC commercial real estate market is on a path to stabilization, stakeholders must navigate the complexities of the office sector’s supply-demand dynamics and the increasing importance of sustainable and premium office environments.

Source: comp.

Vienna’s office market: Steady growth amid economic resilience and investor confidence

In 2025, Vienna’s office market is poised for steady growth, reflecting broader trends in Austria’s commercial real estate sector.

Austria’s economy is projected to return to a growth trajectory in 2025, with a slight positive GDP increase and inflation approaching the 2% stability target. This economic stability is expected to bolster the commercial real estate market, particularly in Vienna.

Across Europe, prime office rents are anticipated to rise more slowly, with nominal growth of 2.5–3% in 2025. Vienna is expected to align with this trend, experiencing moderate rental growth. The city’s office market is well-positioned, with rising take-up reflecting growing occupier confidence.

Vacancy Rate
• In the fourth quarter of 2024, the vacancy rate for modern office buildings in Vienna was 3.56%, indicating a stable demand for office spaces.

Rental Rates
• Prime office rents in Vienna have stabilized at approximately €28.00 per square meter per month.

New Office Space Development
• In 2024, around 90,700 square meters of new office space were completed. Projections for 2025 anticipate an increase in completions to approximately 121,000 square meters, which may help alleviate current supply constraints.

Investment Yields
• Prime yields for office properties in Vienna have adjusted to around 5.0%, reflecting the city’s stable investment environment.

Investor interest in Vienna’s office market remains robust. The limited supply of ESG-compliant prime assets continues to attract domestic investors, maintaining a focus on high-quality office spaces. This trend underscores the city’s appeal as a stable and attractive investment destination.

Looking ahead, Vienna’s office market is expected to benefit from the city’s strategic initiatives to enhance infrastructure and promote sustainable development. These efforts are likely to attract more businesses seeking modern and efficient office environments, further strengthening the market.

In conclusion, Vienna’s office market in 2025 reflects a stable and evolving sector, supported by economic resilience and sustained investor interest. As the city continues to develop, it offers promising opportunities for investors and businesses alike, contributing positively to Austria’s overall economic growth.

Source: comp.

Swedbank and SpareBank 1 to launch Nordic investment bank SB1 Markets

Swedbank and SpareBank 1 are expanding their partnership to establish SB1 Markets, a Nordic investment bank aimed at strengthening financial services across the region. The new venture will enhance Swedbank’s equity research and sales capabilities, deepen sector expertise, and provide a stronger platform to serve corporate clients in Sweden, Norway, and beyond.

Swedbank’s president and CEO, Jens Henriksson, highlighted that the collaboration will broaden opportunities for corporate clients by combining the distribution and expertise of both institutions. Swedbank will hold a 20 percent stake in SB1 Markets, with the remaining ownership controlled by SpareBank 1.

SB1 Markets will employ approximately 240 professionals across Norway, Sweden, and the United States. The Stockholm office will initially have 35 employees from Swedbank’s Corporate Finance and Debt Capital Markets (DCM) High Yield teams, with plans to expand equity research capabilities over time. Bo Bengtsson, head of Corporates and Institutions at Swedbank, noted that clients will benefit from enhanced cross-border services, expanded research, and greater market access through the banks’ networks and the Savings Banks alliances.

Stein Husby, CEO of SpareBank 1 Markets, described the agreement as a key milestone in strengthening the banks’ presence in the Nordic investment sector. The combined expertise will create a competitive financial institution positioned to serve a broader client base with specialized investment banking services.

The Swedish Financial Supervisory Authority (FSA) has been informed, and the transaction remains subject to approval from the Norwegian FSA. The partnership is expected to be fully operational by 1 January 2026.

Photo: Swedbank’s president and CEO, Jens Henriksson

Czech apartment prices reach record highs in 2024, rising by seven percent

The Czech real estate market saw significant price increases across all property categories in 2024, with apartment prices reaching a new record high. According to data from the ČSOB Housing Index, the price of flats increased by seven percent year-on-year, with a further 3.4 percent rise recorded in the final quarter of the year. Apartment prices have now surpassed their previous peak from the third quarter of 2022.

Martin Vašek, CEO of ČSOB Hypoteční banka, noted that the real estate market returned to steady price growth in 2024, driven by strong demand for both newly built and older apartments. The sales period for flats has also shortened, averaging 3.8 months.

The strongest quarterly price growth was seen in the Moravian-Silesian region, where prices rose by 4.6 percent. The Ústí nad Labem and Hradec Králové regions also recorded price increases above four percent, while Prague and Central Bohemia saw growth just below this level. The surge in demand was supported by an 80 percent increase in mortgage volumes, rising real incomes, and buyers seeking to secure properties in a rising market. However, supply remains limited, exerting additional pressure on prices.

While the availability of older apartments declined in the last quarter, the new-build sector is showing signs of recovery, including in regional markets. Developers in Prague and Brno have continued to raise prices with each new stage of development, with costs increasing by around five percent per phase. Smaller flats up to 45 square meters have been particularly in demand, contributing to above-average price growth in the sector. Rental prices also increased significantly, with a 15 percent year-on-year rise, the highest in Olomouc and the lowest in Ústí nad Labem.

In contrast to the apartment market, the house sector remained stable, with demand lower than pre-pandemic levels. The most active areas for house construction were in Central Bohemia and around Brno. A positive development for the sector was a slowdown in the rise of construction costs. However, transaction activity remained limited in areas affected by the September floods, as potential buyers wait for infrastructure reconstruction.

The land market continued to experience strong demand, outpacing supply and maintaining a steady upward trend in prices. The lack of available land is exacerbated by outdated zoning plans and limited utility capacity. As a result, buyers are increasingly looking at plots further from major cities, including those without existing utility connections. Advances in photovoltaics, domestic sewage treatment, and off-grid housing have made previously undeveloped land more attractive. Plot prices continue to depend on factors such as size, location, access to utilities, transport connections, and topography.

With rising demand and constrained supply, the Czech real estate market is expected to face continued upward price pressure in 2025, particularly in the apartment sector.

Source: ČSOB

PAI Partners acquires majority stake in Motel One to support global expansion

Private equity firm PAI Partners has entered into a strategic partnership with Motel One, acquiring an approximately 80% stake in the European budget design hotel chain. This move aims to support Motel One’s international expansion while maintaining its core identity.

Motel One, established in 2000, has grown to operate 99 hotels across 13 countries, including the UK, France, and the US, attracting over 10 million guests in 2024. The company is recognized for offering affordable accommodations in prime city locations with high-end design. Recently, Motel One launched a new lifestyle brand, The Cloud One Hotels, with properties in New York, Hamburg, Düsseldorf, Prague, and Gdańsk.

Following the transaction, founder Dieter Müller will continue as Chairman and will also focus on developing the company’s real estate division, which had been previously separated to support future growth.

PAI Partners brings extensive experience in the hospitality sector, having previously invested in brands such as B&B Hotels, Roompot, and European Camping Group. The firm aims to leverage this expertise to accelerate Motel One’s growth trajectory.

The completion of the transaction is subject to regulatory approvals and is anticipated in the second quarter of 2025.

Central London’s office market sees strong start in January with £1 billion in investment deals

The central London office market had a strong start to 2025, with £1 billion in investment transactions and 248,600 square feet of office space leased in January, according to a report by CBRE. The figures reflect growing investor confidence and sustained demand for high-quality office spaces, following a period of economic uncertainty and shifting workplace trends.

Investment activity in January was driven by several large transactions, signaling renewed interest from both domestic and international investors. The demand for prime office properties remains particularly strong, with institutional investors seeking assets that offer long-term stability and the ability to attract high-quality tenants.

Leasing activity also performed well, with 248,600 square feet of office space taken up across central London. The demand was largely focused on Grade A office spaces, with businesses continuing to prioritize high-specification work environments that offer modern amenities, sustainability credentials, and flexible layouts. The flight to quality trend, which has shaped leasing activity in recent years, continues to be a dominant factor as companies look to create attractive workplaces that encourage employee collaboration and well-being.

CBRE’s report suggests that occupier confidence is growing, as businesses look beyond short-term economic pressures and focus on securing office space that aligns with their long-term strategies. With more investment expected in the coming months, the momentum in the office market could continue to strengthen throughout 2025.

Source: CBRE

Addressing challenges and changes in the development industry

The real estate development industry in Poland continues to evolve, shaped by regulatory challenges, market conditions, and shifting consumer expectations. While large development companies have adopted modern practices and higher standards, public perception remains influenced by past industry shortcomings and the actions of smaller, less established firms. Jakub Sobczyński, Managing Director of Megapolis, one of the largest real estate sales companies in Kraków, discusses the current situation and the factors affecting the industry’s image.

Regulatory Challenges and Local Planning Issues

A key issue affecting real estate development is the lack of comprehensive local zoning plans in many Polish cities. Many investments proceed based on individual development conditions rather than structured, long-term urban planning. Even in cities like Kraków, some zoning documents date back more than a decade and do not reflect current needs. Local governments, despite their competencies, struggle to update plans quickly enough to adapt to economic and social changes, such as the impact of the pandemic on retail and office spaces. This lack of coordinated planning often results in chaotic urban development, which contributes to public criticism of the industry.

Housing Prices and Market Conditions

Rising apartment prices are another concern for buyers, but Sobczyński explains that developers are not the primary drivers of these increases. Housing costs reflect market conditions, financing costs, and rising wages in the construction sector. Banks play a significant role, as buyers not only take loans for their apartments but also indirectly cover financing costs incurred by developers for land purchases, construction, and contractor payments. Over the past two decades, housing prices have increased in parallel with average wages, as the cost of labor and materials continues to rise.

Public Perception and Industry Reputation

Public perception of developers is often shaped by limited personal experience and online discourse, rather than direct interactions with companies. Additionally, smaller, short-term developers that complete only a few projects before exiting the market may not prioritize long-term reputation or customer satisfaction. This contrasts with larger, established developers who implement structured procedures and quality standards.

The industry’s image is still influenced by past issues, particularly from the 1990s and early 2000s, when the sector was fragmented and professional standards were less established. While larger companies now dominate the market, smaller firms still exist, some of which may not operate with the same level of transparency or reliability. Scandals involving failed development projects, where companies sold unfinished properties before disappearing, have further shaped public distrust. Sobczyński emphasizes that choosing reputable developers with a strong track record is essential for minimizing risk.

Improving Industry Standards and Customer Focus

According to Sobczyński, larger developers must take responsibility for improving industry standards and transparency. Megapolis, for example, is a member of the Polish Association of Developers and follows the Code of Good Practices, aimed at addressing industry challenges and ensuring ethical business operations.

A key focus for Megapolis is customer satisfaction, ensuring that projects are developed with long-term livability in mind. The company avoids introducing innovations that may increase profits at the expense of buyers, instead prioritizing solutions that enhance functionality and value. During the pandemic, for example, coworking spaces were added to new developments to accommodate remote work, providing residents with dedicated spaces separate from their homes.

To maintain quality control, Megapolis has established its own internal contractor unit, overseeing all aspects of project execution. Unlike many large firms that outsource construction, this approach ensures consistency in building standards and customer service. Additionally, the company has an after-sales care department, staffed by engineers who manage maintenance and support for completed developments.

Megapolis also encourages community engagement, allowing residents to have a say in managing shared spaces. Through competitions and participatory decision-making, residents can choose property managers and influence aspects of their living environment.

Shaping the Future of the Development Industry

The real estate development industry in Poland is gradually improving its standards, transparency, and customer focus, though public perception remains influenced by past challenges and the actions of smaller, less reliable firms. Megapolis and other large developers aim to reshape the industry’s reputation by prioritizing quality, customer engagement, and ethical business practices. While the full impact of these efforts will take time to materialize, research indicates that the industry is moving in the right direction.

Source: Megapolis

OECD urges Czechia to strengthen fiscal sustainability, innovation, and workforce skills

Czechia has made significant economic progress since joining the Organisation for Economic Co-operation and Development (OECD) three decades ago, benefiting from its open trade policies, stable institutions, and a well-educated workforce. However, an ageing population, slowing productivity growth, and fiscal sustainability challenges require further policy action, according to the latest OECD Economic Survey of Czechia.

The OECD forecasts that economic growth will accelerate to 2.1% in 2025 and 2.5% in 2026, while inflation is expected to decline to 2.3% in 2025 and 2.0% in 2026. However, risks to this outlook remain, including geopolitical uncertainties, potential disruptions in supply chains, and slowing demand from key trade partners like Germany.

OECD Secretary-General Mathias Cormann, presenting the report in Prague alongside Prime Minister Petr Fiala, emphasized the need to improve education, workforce skills, innovation, and business competitiveness to sustain long-term growth. He also called for continued fiscal consolidation to prepare for rising public spending pressures, particularly related to population ageing and the green transition.

Recent pension system reforms should be fully implemented, the report states, while linking the retirement age to life expectancy could help contain future spending. Adjustments to family benefits, such as shortening parental leave and shifting towards greater investment in childcare, would support higher female workforce participation.

The OECD highlighted that productivity growth has stalled since the pandemic, widening the gap between Czechia and other OECD economies. Supporting research and development (R&D) funding for small and young firms, improving access to capital markets, and simplifying business regulations could foster greater economic dynamism. Additionally, streamlining insolvency procedures and strengthening the start-up ecosystem would help innovative businesses expand.

In the education sector, while Czechia’s overall school outcomes remain strong, disparities persist. Expanding access to affordable, high-quality childcare could improve long-term educational outcomes for children from vulnerable backgrounds. The OECD also recommends enhancing teacher working conditions, including offering more career progression opportunities, to attract and retain qualified educators.

Skill shortages and mismatches in the labour market remain a challenge. The OECD suggests reforming vocational education and training to better align graduates’ skills with employer needs. Increasing tertiary education attainment and upskilling opportunities for adult workers would further enhance workforce adaptability in response to changing labour demands.

On climate policy, the OECD calls for a cost-effective mitigation strategy to support Czechia’s transition to net-zero emissions. The planned phase-out of coal by 2033 is considered essential, requiring faster deployment of renewable energy sources. Stronger incentives for housing renovations are also recommended to reduce energy consumption and emissions in the building sector. The report further notes that carbon pricing in sectors outside the EU Emissions Trading System is too low to meet climate targets, suggesting adjustments to make pricing more effective.

The OECD’s findings underline the importance of targeted reforms in fiscal policy, workforce development, business competitiveness, and climate strategy to ensure sustainable economic growth and long-term resilience in Czechia.

Source: OECD

President von der Leyen announces ReArm Europe Plan to strengthen EU defence

European Commission President Ursula von der Leyen has outlined a new defence package aimed at significantly increasing Europe’s military capabilities. Speaking ahead of the European Council meeting, she emphasized that Europe must act decisively to address growing security threats and take greater responsibility for its own defence.

Von der Leyen acknowledged that European security is under direct threat and that member states are prepared to increase defence spending. She stated that Europe is entering an era of rearmament and must respond both to immediate security challenges, including support for Ukraine, and to long-term defence needs. To facilitate this, she introduced the ReArm Europe Plan, a set of financial measures designed to help EU countries rapidly expand their defence investments.

The plan includes five key components. The first is a proposal to activate the national escape clause of the Stability and Growth Pact, which would allow EU member states to increase defence spending without triggering the Excessive Deficit Procedure. Von der Leyen noted that if countries raised their defence budgets by 1.5% of GDP, it could generate fiscal space of nearly EUR 650 billion over four years.

The second measure involves a new financial instrument offering EUR 150 billion in loans for member states to invest in military capabilities. The focus will be on joint procurement of key defence assets, including air and missile defence systems, artillery, drones, ammunition, cyber defence, and military mobility. This approach aims to reduce costs, enhance interoperability, and strengthen Europe’s defence industry, while also ensuring immediate military support for Ukraine.

Von der Leyen also outlined plans to leverage the EU budget to direct more funds toward defence investments. She proposed additional options for member states to use cohesion policy funds for this purpose.

The final two elements of the plan focus on mobilizing private capital. This will be achieved by accelerating the Savings and Investment Union and working with the European Investment Bank to finance defence-related projects.

Von der Leyen stressed that the ReArm Europe Plan could mobilise nearly EUR 800 billion to enhance Europe’s security and resilience. She reaffirmed the EU’s commitment to NATO and continued cooperation with its partners. With these measures, she stated, Europe is ready to take responsibility for its own defence and step up to the challenges ahead.

Source: EC

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