The City has lost its dealmaking swagger after the coronavirus pandemic and Brexit jitters dragged takeover activity to the lowest level in more than a decade, insiders have warned.
Boardrooms are snubbing deal talks to focus instead on keeping their businesses afloat during lockdown, lawyers and bankers said, dragging the number of takeovers happening in Europe to its lowest level since 2004, according to data provider Refinitiv.
Ian Hart, UBS's co-chairman of UK investment banking, said: "The initial impact of the Covid crisis was to put deals on hold while companies and sponsors assessed their own situations. However, although relatively few deals have reached announcement in the UK yet we sense a strong level of underlying interest."
Britain's mergers and acquisitions market has not been this quiet since the aftermath of the financial crisis in 2009, and fears are growing that the Square Mile will struggle to win back business after a brutal blow from the Covid crisis and as Brexit jitters keep activity in the deep freeze.
Nick O'Donnell, a lawyer at Baker McKenzie, said it feels like businesses are "preparing for possible storms ahead" with deals being tabled "measured and thought-through rather than emotional," such as spinning off divisions to cut costs instead of pushing ahead with blockbuster mergers.
He added: "I've heard the generation before mine say that the real glory deal days were back in the 80s. The move to more remote dealmaking should see a continuation of the journey from those brash dealmaking days to a more calculated approach."
Dwayne Lysaght - joint head of European dealmaking at JP Morgan, one of the advisers to Liberty Global's $7.4bn (£5.6bn) agreement to buy Swiss telecoms firm Sunrise this week - agreed that bosses cannot afford any mis-steps and are taking a cautious approach to talks.
He said: "The biggest impediment to deals at the moment is [bosses saying] 'where do I put my step and where do I judge my own business to be?'
"We're seeing an increase of stock versus cash with more payouts for milestones, so people are keeping their cash firepower and adjusting the structure of deals."
As boardrooms think carefully about whether to go ahead with a deal, meaning fewer mergers are getting the go-ahead, the number of takeovers being aborted midway through has plunged.
Just 10 UK deals have been pulled this year according to Refinitiv, the lowest since 2014. The number of ditched deals across Europe is the lowest since 2005.
However, Mr Lysaght said Covid-19 has not completely wiped out deals and he does not expect a dramatic drop in terms of numbers next year.
Santander UK banker Sean Longsdale said there are still opportunities in industries that traded well during lockdown, such as technology and telecoms, and from businesses that will need to sell assets to bolster their reserves after coronavirus.
Jan Skarbek, head of UK investment banking at Citi, said deals in the coming months will come from large corporates offloading non-essential operations. Industry winners will also take the opportunity to pick off weaker rivals, he said.
Earlier this month, bankers said that new rules forbidding lengthy, off-record lunches were making it impossible to spend time getting to know potential clients.
One senior banker said deals were getting done with video conference calls when needed, but largely only where there were existing relationships.