UK mid-market PE activity

Business services continued to dominate mid-market deal volume as investors sought out assets that could demonstrate reliable recurring revenue.

PE appetite for mid-market business services firms rebounded in 2024 with total volumes up more than 19 percent versus 2023. Already the dominant sector for inbound PE investment, business services represented 45 percent of the total deals announced in the year (up from just 38.2 percent of deals in 2020).

“The Business Services market remains a cornerstone of the M&A market and has once again demonstrated its resilience during 2024,” says Neil McManus, Partner and Head of M&A Business Services at KPMG LLP. “Professional Services remains an area of significant opportunity. At the end of 2024 Private Equity investors began realising significant returns from investments in Accounting Services and the market has started turning its attention towards Legal Services as the next area of opportunity.”

Interestingly, the Technology, Media and Telecoms (TMT) sector enjoyed the biggest volume gains in the year with a 34.9 percent rise in activity over 2023 and a 14.1 percent rise in values in the same period. “The days of valuing growth above all else are behind us,” notes Graham Pearce, Partner and Head of TMT M&A at KPMG LLP. “Yet there are still huge opportunities for scaling profitable TMT businesses that are bringing digital innovation to their sectors.”

Consumer goods and retail also saw strong volume growth of 27.5 percent as investors sought to capitalise on lower valuations. “The stabilisation of economic factors, particularly inflation, made for a more stable platform for consumer M&A activity,” adds Robert Baxter, Partner and Global Head of Consumer Goods & Retail M&A at KPMG LLP. “The sector improved significantly on the lows of 2023, but this was really a recovery, and the sector still has further to go.”

The data also suggests that a number of sectors punched above their weight in terms of values. Financial services, for example, represented 11.1 percent of total volume but 14.5 percent of the cumulative value. Energy deals represented 3 percent of total volume but 4.5 percent of cumulative values.

Deal activity picked up across most regions of the UK as mid-market PE dealmakers broadened their regional scope to identify and build relationships with new targets.

While London remained the dominant region for dealmaking with 43 percent of the total deals in 2024, it was Scotland that saw the biggest growth in deal activity in 2024 (up 37.5 percent with 55 announced deals).

“There is a well-established private equity network in Scotland, with many national players having their own dedicated regional teams in Scotland driving a steady flow of deal activity,” comments Graeme Williams, Head of Corporate Finance M&A, Scotland at KPMG LLP. “However, we have also seen a number of London-based funds attracted to investing in Scotland, which is testament to the attractiveness of the market and the resilience shown by Scottish companies through a challenging deal environment”.

The North West and the South East also saw significant volume gains versus 2023. Indeed, without exception, volumes grew across all UK regions in 2024.