UK Private Equity Market

Hey Everyone! Let’s Dive into the Big Picture!

Today, we’re examining the latest macroeconomic shifts and their impact on the market. Stay tuned as we explore the ripple effects on the global stage! 💡📊

The UK Private Equity market in 2025 was a year of selective optimism, a real mixed bag. While deal values bounced back, deal volumes stayed flat, creating a “two-speed” market. Premium assets attracted strong multiples, but mid-market transactions needed creative structuring.

The market did not experience the boost anticipated from lower interest rates and greater political stability following the 2024 elections. Looking ahead, the market is again optimistic about 2026 and expects increased activity, supported by regulator reforms, financing flexibility, and sector tailwinds.

Whilst aggregate deal value improved, volumes were fairly static (albeit more resilient in the UK & Ireland than wider Europe, with the UK and Ireland’s demonstrating leadership in terms of deal volume, value, and fundraising, maintaining its position as Europe’s PE Powerhouse despite macroeconomic uncertainties, according to data from PitchBook).

Deal volume in early 2025 was affected by macroeconomic conditions, but larger transactions led to growth. According to Global Data, PE buyouts in Q1 2025 fell sharply (down 36% from Q4 2024 and down 18% from Q1 2024), as investors frontloaded deals in Q4 of 2024 ahead of UK tax changes and global economic uncertainty. However, the data also shows that the average size of deals increased notably, and the presence of several high-value deals indicated a flight to quality assets.

Buy-and-build strategies continue to dominate mid-market activity as investors focus on driving growth within existing portfolios amid subdued exit conditions. According to PitchBook, add-on acquisitions accounted for approximately 56% of European private equity deal volume in 2025 by deal count. Reflecting the tougher exit environment, the sponsor holding periods have extended to around 5.3 years, up from circa 4.1 years in 2020, based on data from gain.pro. Sector-wise, consumer and industrial assets were among the hardest hit, while healthcare and life sciences (-57%), financial services (-46%), and technology/media (-41%) experienced the sharpest declines in deal volumes in Q1 deal volumes in Q1 2025, according to GlobalData.

Despite the reduction in the costs of capital and expectations of more moderate sell-side valuation levels after the “Covid deal boom”, valuation gaps persisted. These disconnects have contributed to longer and more complex deal processes, with buyers and sellers increasingly relying on sweet equity awards to bridge differences.

It appears that some investments made during the “Covid deal boom” under accelerated timelines have not performed as anticipated, which may be driving continued nervousness around valuation and an increased focus on due diligence.

Unsurprisingly, investment remained robust in the technology sector, with a clear premium placed on revenue-visible and AI-enabled businesses. Investors also adopted more creative deal structures, including the selective acquisition of customer subscriptions from within broader businesses, with consideration linked to the amount of ARR successfully transitioned to the buyer.

Business services also featured strongly, particularly law firm and accountancy firm acquisitions, a trend that appears to be gaining traction across multiple jurisdictions. By way of example, Shoomsmiths advised Azets on its acquisition of Ensors, one of East Anglia’s oldest and most established firms of chartered accountants. Meanwhile, energy and infrastructure investments continued to build momentum throughout 2025.

Within business services, regulatory approvals from professional bodies such as the FCA and SRA were a notable feature and contributed to longer transaction timelines during the year.

Despite expectations of an “exit rebound”, private equity-backed IPO activity recovered only modestly in 2025, with the UK market lagging other regions. That said, overall sentiment remains constructive. Continuation funds and the GP-led secondaries market are now firmly established and, following what is expected to be a record year, have become a core component of sponsor strategies. These solutions continue to play a critical role in addressing longer holding periods, market uncertainty, and growing investor demand for liquidity.

A similar dynamic of intense competition for high-quality assets has played out in the debt financing markets. Over the past 12 months, lenders have competed aggressively for strong deals, typically to the benefit of private equity sponsors. Sponsors’ reputation and execution track records often provide an advantage in competitive processes, enabling not only sharper pricing but, more notably, increased flexibility on key terms.

This flexibility has most clearly been seen in areas such as expanded permitted acquisition baskets to support buy-and-build strategies; greater freedom to upstream payments to sponsors and holding company management; broader permitted purposes for commercial acqusition facilities (including funding earn-outs and deferred consideration during the loan term); and enhanced provisions to accommodate continuation vehicles and protability on a change of control, reflecting extended holding periods.

Cautious optimism is likely to remain a theme in 2026. Deloitte’s 2026 M&A Trends Survey shows that 90% of PE respondents expect to increase deal counts and aggregate value in 2026, while 2025 ended with high deal value but flat volumes. Public-to-private momentum may pick up in 2026, as UK mid-caps remain attractively valued. Sponsors continue to feel pressure to return liquidity to investors, so optimistic that we may finally see the exit uptick in 2026. The legal market should be prepared to assist clients with exit readiness to ensure smoother and speedier processes.

While expectations for improved exit momentum are rising and many corporates and sponsors are actively preparing for anticipated processes, continuation vehicle transactions are expected to remain a mainstream liquidity solution. Analysts estimate that approximately 20% of distributions in 2026 will be generated through continuation vehicles, according to Cambridge Associates.

There is also growing optimism around the UK IPO market. Regulatory reforms introducing streamlined prospectus requirements and shorter disclosure timelines, alongside stamp duty incentives for new London Stock Exchange listings, may improve the attractiveness of public markets. This could further support the recovery in private equity–backed IPOs, which more than doubled in the first three quarters of 2025, with proceeds increasing by 68%, according to City AM.

Competition in the debt markets is expected to remain strong, with ample credit available for high-quality transactions. Anecdotally, challenger banks and alternative lenders are increasingly adapting both their products and teams to offer more flexible, sponsor-style terms. We anticipate continued competition on pricing and documentation for new acquisitions, while refinancings and recapitalisations are likely to remain prevalent until exit activity meaningfully accelerates.

Technology is expected to continue commanding premium valuations for category leaders, particularly those leveraging AI as an operational enabler amid accelerating global adoption. Healthcare and essential services are also likely to remain core areas of focus, with recurring revenue models underpinning mid-market private equity strategies.

Energy and infrastructure are anticipated to attract sustained investor interest, with some commentators predicting the sector will rank among the top three for private equity investment through to 2030. Business services are also expected to remain highly attractive, not only in the mid-market but increasingly in the upper mid-market, as illustrated by Bridgepoint’s announced acquisition of Interpath from H.I.G. Capital at the start of 2026.

Trends such as longer holding periods, subdued exits, buy-and-build strategies, earn-outs, and continuation funds explain:

An aspiring solicitor who understands this can better grasp the commercial logic behind the drafting, rather than treating it as purely technical.

Private equity clients care about:

Knowing the market context allows you to frame advice in commercial terms, which is a key differentiator in interviews, vacation schemes, and early practice.

This knowledge is especially important if you’re interested in:

Even as a trainee, you’ll be expected to understand why continuation funds exist, why exits are delayed, and why lenders push for certain protections.

Firms increasingly ask:

Being able to link macroeconomic conditions → sponsor behaviour → legal complexity shows commercial awareness, not just memorisation.

In practice, trainees are involved in:

Understanding the why behind these tasks makes you faster, more accurate, and more credible.

Buy-to-build strategies are a private equity (PE) approach where an investor:

Thank you for reading! 😁