UK Private Equity Landscape

PE deal activity may have bottomed out in the UK in 2023, however activity picked up in the second half of 2024 and we expect increased activity levels to continue into 2025.

When assessing the outlook for PE activity in the UK, we tend to keep a close eye on the following areas: levels of new deal activity (particularly into new platforms or secondaries as leading indicators of investor confidence), exit activity, debt market liquidity, levels of dry powder and how much traction funds are getting with fundraisings. On the deal volume and debt market front, 2024 demonstrated significant improvements over 2023 and fundraising momentum seen in 2022 and 2023 has also continued in 2024, albeit there is a flight to larger and more established funds.

Towards the back half of 2024, we witnessed significant activity as many business owners tried to get ahead of expected Autumn Budget changes to Capital Gains Tax. Given the current signals in the market around increased activity levels – alongside improving business confidence, reducing inflation and interest rates and greater political certainty – we are cautiously optimistic that UK PE mid-market deal activity will see significant growth through 2025 and 2026. PE managers and company owners should be preparing to make the most of an active market.

Alex Hartley

Partner, Head of UK Corporate Finance

KPMG in the UK

mail
call

Subscribe to private equity insights

Based on KPMG professionals’ view of the market, here are five trends that PE managers and mid-market owners may want to watch as we progress through 2025:

Exit strategies

With exit levels having been depressed, we expect to see greater scrutiny on exit plans from Investment Committees, particularly on larger assets and platforms and a ramp up in further exit activity in 2025.
Bolt-ons

Bolt-on acquisitions and buy-and-build platforms will continue to be a primary value creation strategy for UK PE funds.
Specialisation

Managers will become more focused and build conviction for particular sectors that exhibit growth, resilience and consolidation opportunities, while generalist funds with little differentiation may to struggle to attract new funding.
Extending the runway

Expect to see an increase in the number of continuation funds and the use of refinancing to help PortCos create greater value for investors.
Value creation

In 2025, expect to see more robust planning around value creation, both from a buy-side and a sell-side perspective.

Based on data from PitchBook and augmented with insights from KPMG professionals across the UK, this report provides a snapshot of 2024 activity and some forecasts for 2025 and beyond. To learn more about the topics raised in this report, or to discuss your fund or organizational strategy, we encourage you to contact us or one of our regional leaders.

2025 outlook and key takeaways for PE and mid-market owners

KPMG professionals are cautiously optimistic that deal activity will continue to pick up in 2025 and 2026.

Building on the momentum of the second half of 2024 and bolstered by positive economic data around inflation, interest rates and business confidence, we anticipate deal activity to continue to pick up through 2025 and 2026. Expect valuation gaps to narrow further as buyers try to build conviction for high quality investment opportunities in selected sectors and sellers seek to explore long-awaited exits.

Platform and buy-and-build deals will likely continue to dominate the deals markets as PE investors seek to drive growth through strategic bolt-ons, particularly in the Business Services and TMT sectors. At the same time, we expect to see increased activity in the energy and retail sectors as investors refocus to capitalise on increased government investment and rising consumer sentiment.

Based on our view of the market, here are three tips to help PE managers and company owners capitalise on the opportunities.

Find the right buyer

Recent experience suggests that many successful processes start as a series of smaller bi-lateral conversations. This involves spending time with the priority buyers well ahead of the process to build their conviction and strategic rational for the acquisition.
Double down on due diligence

Getting the right price and creating value from a deal requires buyers to have deep insight into the business and markets they are targeting. While speed may be important to securing a deal, it should not come at the cost of robust due diligence.
Extend the runway (if the conditions aren’t right for exit)

PE managers will want to consider how continuation funds might help provide additional time for growth for their LPs (and themselves). Company owners may also want to consider whether a minority investment from a larger, more international PE funds could help provide additional support for value creation and overseas growth ahead of a future sale.