Deal volumes and deal values saw growth in 2024, driven by an improving M&A environment on the back of reducing inflation and interest rates together with increasing political stability. Deal activity continued into 2025 albeit many businesses are now carefully navigating the current volatility as a consequence of the US trade tariffs and the UK tax rises for employers.
- An uptick in PE deals volumes, deal values and higher deal valuations: Mid-market PE deal volumes rose to their highest levels in more than three years in the second half of 2024 as inflation and interest rates began to stabilise. The narrowing of valuation gaps and increased demand from buyers are expected to lead to higher valuations for high quality opportunities, especially in highly resilient and growing sectors such as Business and Tech-enabled Services, TMT or Energy.
- A return to strategic M&A activity: Companies with unique value propositions, such as specialised technology, strong customer relationships or proprietary expertise are well-positioned to attract strategic buyers.
- Mid-market momentum: Mid-market PE deals accounted for 49% of total PE activity in 2024, and interest is particularly favourable to those businesses with capabilities like AI and renewable energy technology.
- Record cash pile: Corporates have accumulated substantial cash reserves and are expected to be a significant force in driving M&A activity and to enhance their competitive edge and core revenue-generating functions.
- Boom time for bolt-ons: PE Investors gravitated towards bolt-ons as they looked for lower-risk opportunities to deploy capital.
- Increased Competition among Lenders: Falling interest rates will make financing more attractive, potentially increasing deal volumes. We have also seen the emergence of the market for private credit which has created a much greater range of options for companies seeking debt finance.
The mid-market M&A in the UK is expected to see a resurgence during 2025, driven by factors like declining inflation, lower interest rates and the accumulation of private equity capital. However, there some headwinds remain around regulatory scrutiny, tariffs and ongoing geopolitical uncertainty, the overall outlook though, is cautiously optimistic.
Alex Hartley
Partner
Head of Corporate Finance, UK
alex.hartley@kpmg.co.uk
