UK M&A Outlook 2026: Tempered optimism after a slow year

As 2025 comes to a close, it seems to have once again been a year that promised much for dealmakers, only to ultimately be defined by caution and selectivity, in both the domestic market and on the international stage.

For much of the year UK M&A activity could not quite match the explosive growth seen elsewhere across the globe, however the local market began to demonstrate clear strategic strengthening in Q4.

While the UK saw total M&A activity reach $367 billion (approximately £270 billion) in 2025 - a 20 per cent increase year-on-year - the headline figure masks a profound structural shift in the market, with this growth driven largely by a 74 per cent surge in foreign takeovers, which reached $142 billion (around £105bn), according to London Stock Exchange Group data.

More than half of these foreign acquisitions involved American buyers, while domestic UK dealmaking value collapsed by 54 per cent to approximately $44 billion (around £32.7bn), marking the lowest level since 2016.

Hopes that the comprehensive 2024 election result would usher in a new era of political and economic stability proved to be unfounded, as uncertainty continued to impact dealmaker sentiment throughout the year. Internationally, meanwhile, M&A has been hit by ongoing geopolitical turmoil and anxiety around US trade tariffs.

However, in the spirit of optimism, we look ahead to how dealmaking could pan out in 2026 with reports of increasing private equity activity, strong dealmaking appetite across a range of sectors and a renewed sense of stability following the much-anticipated (/feared) Autumn Budget.

In our latest annual M&A outlook, we explore the trends that could define dealmaking in the year to come, training a spotlight on some of the major challenges that dealmakers could face and taking a look at some of the sectors that could see notable M&A activity.



2025: Uncertainty reigns
Looking back at dealmaking in 2025, the best way to define the year is one in which significant momentum was not realised. Unlike in previous years, such as 2020 and 2022, when M&A appetite was low in the face of genuine crises, 2025 was a year in which dealmakers were actively seeking to do deals.

In the 2025 edition of CMS’s annual M&A outlook, close to two-thirds of dealmakers polled said that they expected European M&A activity to increase over the coming 12 months.

Following a tentative recovery in 2024, we said at the end of last year that dealmaking could be poised for a revival, providing that economic and political stability was solidified, private equity activity recovered and cross-border M&A continued to increase.

However, while cross-border dealmaking has remained a feature of UK M&A, this scenario has not come to pass. Private equity investors have remained cautious despite record levels of unspent capital, discontent with the Labour government has intensified massively and economic uncertainty has remained a major drag on dealmaking.

Rather than unleashing pent-up demand, the challenging market led to a drop in activity. During the first half of the year, PwC reported that UK M&A deal volume stood at 1,478 disclosed deals, down 19.1 per cent from 1,828 during the same period of 2024.

Disclosed deal value, meanwhile, fell 12.3 per cent from £65.3 billion in H1 2024 to £57.3 billion in H1 2025. This decline reflected the weakness in domestic dealmaking, even as foreign buyers circled undervalued UK assets.

PwC UK’s Global Head of Deals Lucy Stapleton said at the time: “The UK M&A market in 2025 has been characterised by a sense of restrained momentum. There’s a strong pipeline of deals ready to go, but many remain paused due to ongoing volatility.”

Initial figures for the third quarter showed a similar story, with the ONS recording just 456 transactions, down from 531 in Q2 2025. However, there were positive signs, with volume and value both up on a year-on-year basis compared to Q3 2024 (when dealmakers were arguably even more affected by pre-Budget uncertainty).

Furthermore, RSM UK reported “a flurry of accelerated completions in October and November” ahead of the Autumn Budget, putting Q4 on course for stronger levels of activity. Despite this, there is no getting away from the fact that 2025 has not delivered the concerted recovery in UK dealmaking that many had predicted.

On the global stage, the signs were more positive. Global M&A activity surged nearly 50 per cent to reach $4.5 trillion (£3.3 trillion) in 2025, making it the second-highest total in over four decades and trailing only the pandemic-era boom of 2021, according to data from the London Stock Exchange Group. The year was characterised by an unprecedented 68 megadeals valued at over $10 billion each - the highest number ever recorded.

US deals accounted for more than half the global total at $2.3 trillion, the highest share since 1998. Investment banking fees reached $135 billion, reflecting a 9 per cent rise from the previous year. While tariffs and geopolitical uncertainty weighed on dealmaking earlier on in the year, WTW stated in December 2025 that the first nine months of the year indicated that the M&A market was on track for the best year since the post-COVID boom.

Jana Mercereau, Head of Europe M&A Consulting at WTW, commented: “After a turbulent start to 2025 marked by aggressive tariff policies and geopolitical tensions, the recent M&A surge suggests a recalibration in the market. Buyers have learned to normalise and move through uncertainty, supported by lower financing costs and increased confidence in future growth prospects.”

The general economic backdrop remains gloomy however, with private sector output on track to fall across nearly every sector in the last quarter of 2025. Adzuna data shows that the number of job vacancies in the UK dropped 15% in November.

Predictions for 2026
With the M&A market strengthening towards the end of 2025 across the globe, 2025 ends much as 2024 did, with optimism for a resurgence in dealmaking during 2026, as well as wariness over the persistent challenges that dealmakers face, led by the current brake on private sector investment and hiring.

The divergence between UK and global M&A performance in 2025 provides crucial context: while global dealmaking posted its second-best year on record, the UK domestic market experienced its weakest performance in nearly a decade. This underscores that challenges facing UK dealmakers in 2026 are as much structural and domestic as they are global in nature.

According to the CBI, private companies are predicting that economic activity will drop even further for the first quarter of 2026.

Meanwhile, CMS’s 2026 European Outlook Poll reveals that dealmakers are once more cautiously optimistic about the prospects for European M&A, albeit slightly less so than a year earlier. 50 per cent say that they expect European M&A activity to increase over the coming 12 months, compared to 65 per cent last year. Furthermore, the percentage that anticipate a decline in activity has increased from 24 per cent last year to 29 per cent.

Analysing why confidence had weakened over the preceding year, the report identified ambiguity over US trade tariffs with Europe, the economic impact of tariff uncertainty and the European Commission's revising downward of GDP growth forecasts.

Unlike the bulk of the countries that make up the report, which are headquartered in the European Union, the UK has a different tariff situation with the US. Sir Keir Starmer’s charm offensive with President Trump has been widely credited as helping to achieve more favourable tariffs for the UK.

Whereas the EU faces 15 per cent tariffs, the UK baseline stands at 10 per cent, while there are specific deals for certain sectors, such as zero tariffs on UK pharmaceuticals.

CMS reports that corporate dealmakers have sounded a particularly cautious tone, following a year in which just 19 per cent completed three or more deals (compared to the 41 per cent that said they expected to reach this threshold a year earlier). In the year ahead, just 21 per cent expect to complete three or four deals and the same percentage expect to be involved in no transactions at all.

Under growing pressure to deploy their record levels of unspent capital, private equity buyers polled by CMS are unsurprisingly sounding more proactive. Close to half (47 per cent) expect to be involved in three or four deals and 32 per cent to be involved in five or more, compared to just 21 per cent who expect to only be involved in one or two.

In terms of UK M&A, the UK & Ireland ranks second for expected M&A growth, behind only the Benelux region. 29 per cent of dealmakers polled by CMS put the UK & Ireland in their top two positions for the coming year (Benelux recorded 38 per cent of top two spots).

Citing the reasons for choosing the UK & Ireland in their top two, dealmakers pointed to the scale of the market, developed financing networks and the growth ambitions of UK companies. The report quotes an Italy-based corporate CEO citing the “strong globalisation potential” of UK companies in many sectors, as well as a US strategy officer who said US firms “have always found the UK to be stable for their investment intentions”, due to its financing options for larger investments.

The UK also ranked second behind Benelux when dealmakers were asked about which country or region in Europe they expected to be the leading investment destination over the coming year, cited by 16 per cent.

Overall, the picture heading into 2026 is mixed, with many corporate dealmakers clearly anxious amid ongoing economic uncertainty. Private equity buyers, meanwhile, seem poised to undertake higher levels of activity, motivated by investor pressure.

As RSM UK recently reported, private equity activity began to pick up towards the end of 2025, largely in the form of smaller, bolt-on transactions. This uptick in add-on private equity transactions, combined with the seeming reticence of corporate buyers, suggests that any recovery in UK M&A during 2025 is likely to be driven, in large part, by lower and mid-market transactions, potentially supplemented by strong ongoing activity among overseas (particularly US) buyers.

Top M&A drivers for 2026:

Private equity - While economic conditions are likely to remain somewhat unstable, it is hard to ignore the growing pressure private equity firms are under to deploy the piles of capital they have accrued over recent years. CMS’s report shows a clear acceptance among private equity respondents of the need to utilise funds and make investments over the coming year.

In the UK, slower private equity dealmaking has been cited as a major factor in the tougher fundraising environment that PE firms are beginning to face. Amid a serious lack of dealmaking, PE firms are struggling to produce the numbers they need to demonstrate strong performance and attract funding.

While private equity firms have seemingly been satisfied to sit on their hands over recent years and wait for more stable economic times to return, the potential for a lack of M&A to negatively impact their fundraising capacity could be enough to force many to return to the market in 2026, even if that means they initially focus on smaller and mid-market deals.

Economic uncertainty has also impacted PE activity on the sell-side, with weak valuations and general market headwinds seeing many firms hang onto investments for longer than they normally would. As we enter 2026, the need to realise these investments, combined with improved M&A appetite among PE counterparts, could act as a further driver to M&A.

Mid-market deals - It won’t just be among private equity buyers that smaller and mid-market deals are set to be more popular. As M&A levels recover, buyers of all types are likely to turn towards smaller transactions, which are less costly, lower risk, less onerous in terms of due diligence, have a lower regulatory burden and can often drive higher returns.

According to CJPI Insights, the attractiveness of mid-market deals means that, in 2026, “well-prepared mid-sized businesses are likely to attract strong interest, especially where growth or consolidation stories are clear.”

WTW’s Jana Mercereau agrees, stating that, while she expects bigger deals to continue to recover in 2026, large-scale dealmaking is likely to be underpinned by buy-and-build strategies “rather than higher risk, one-off transformative deals.”

“With a focus on core strengths,” she continues, “this back-to-basics approach will gain traction, particularly in mid-market deals, as buyers make smaller, complementary acquisitions to achieve rapid expansion, synergies and integrate critical technologies.”

Cross-border dealmaking - Foreign takeovers of UK companies emerged as the defining characteristic of UK M&A in 2025, with overseas buyers committing $142 billion (approx. £105bn) to UK acquisitions, a remarkable 74 per cent increase from 2024 that far outpaced the broader 20 per cent rise in total UK M&A.

This surge in inbound activity drove UK dealmaking growth, compensating for the 54 per cent collapse in domestic transactions. American buyers led the charge, accounting for more than half of all foreign acquisitions, attracted by the UK's persistently undervalued market and the country's status as a world leader in key sectors.

The scale of this shift cannot be overstated: foreign takeovers represented nearly 40 per cent of all UK M&A value in 2025, up from approximately 22 per cent in 2024. Philip Noblet, who leads UK & Ireland investment banking at Jefferies, observed: ”The UK stock market remains significantly undervalued. The valuations are still disappointing compared to rival firms in both the US and Europe, which is why interest continues to grow... We anticipate more strategic engagement from foreign investors in 2026, particularly with larger corporations.”

While Q3 2025 saw inbound M&A value of £7.9 billion—down £3.6 billion from Q3 2024—this reflected quarterly volatility rather than a trend reversal. RSM UK noted that deal volume remained robust, with inbound acquisitions, particularly from US buyers, driving much of Q3 activity."

RSM UK’s partner and Head of M&A James Wild commented: “With tariffs and political uncertainty in the States putting a pause on some deals, US investors are increasingly looking across the pond for UK businesses with strong growth potential.”

UK boards have notably gained confidence in demanding higher premiums for takeover bids. Murray Cox, a partner at Weil, Gotshal & Manges, said: “UK boards have gained more confidence… they are likely to demand higher premiums for takeover bids than has been typical in the past.”

This was evidenced by deals such as KKR's bid for Spectris, which represented nearly a 100% premium to the company's pre-bidding war share price. Nevertheless, the ongoing attractiveness of UK assets to foreign buyers, combined with the challenges facing domestic dealmakers, suggests that 2026 will see continued—potentially accelerating—foreign acquisition activity.

As well as US buyers attracted by favourable valuations, consolidation opportunities and the UK’s status as a world leader in many key sectors, the UK is also remaining attractive to European buyers, as illustrated by its ranking as the second top M&A and investment destination in the CMS poll.

While cross-border activity is expected to prove more challenging in 2026, due to trade related and geopolitical volatility, the UK is still clearly an attractive market and, perhaps more importantly, a resilient one.

In the 2025 edition of the Mergers and Acquisitions Research Centre’s M&A Attractiveness Index Score (MAAIS), the UK ranked fifth with an index score of 71 per cent, up two places from 2024, and behind only the USA, Singapore, Germany and Canada.

Discussing the UK’s attractiveness to dealmakers, Naaguesh Appadu, senior research fellow at Bayes, pointed out how the UK had remained robust despite a flurry of different prime ministers and high inflation in the wake of Brexit, COVID-19 and the Russia-Ukraine war.

Going into 2026, this hardiness, combined with the continuing attractiveness of UK companies and favourable valuations, means that cross-border M&A will surely remain a major aspect of UK M&A in the coming year.

Distressed M&A - While the UK economy may have recovered significantly from the severe shocks it experienced in the wake of events such as Brexit, COVID-19 and the war in Ukraine, there is no doubt that businesses in many sectors are continuing to suffer.

Insolvencies remained below the 2023 peak during 2025, but were still at high levels. In October 2025, for instance, ONS figures showed 2,029 registered insolvencies in England and Wales, an increase of 2 per cent from the previous month and of 17 per cent from October 2024.

However, November 2025 data showed a notable decline to 1,866 insolvencies, 8 per cent lower than October and 7 per cent lower than November 2024, representing the lowest monthly total for the year and suggesting potential stabilisation in corporate distress levels.

Even if the UK economy experiences a strong recovery in 2026, the lag between economic improvement and this effect being felt by struggling businesses means that there is unlikely to be a significant reduction in insolvency levels during 2026.

In fact, the figure may increase further, with the most recent Begbies Traynor Red Flag Alert putting the number of UK companies in critical financial distress at 55,530 at the end of Q3. This was 12.6 per cent higher than at the end of Q2 and a shocking 78 per cent higher than the same point in 2024.

While this will undoubtedly lead to a great deal of companies collapsing, it also will drive an increase in distressed M&A opportunities. This is something borne out by the CMS 2026 outlook report, in which 38 per cent predicted that distress-driven M&A would dominate sell-side activity, while 31 per cent said undervalued targets and turnaround opportunities would drive buy-side activity.

A UK finance director quoted by CMS explained the attraction of distressed opportunities, saying such deals “reduce the financial pressure when we are acquiring. There are fewer parties interested because of the higher risks and we can capitalise on opportunities.”

Insolvency and distress figures indicate that the hardest hit businesses have been those in consumer-facing industries such as retail and hospitality, who have been hit by rising costs and weak consumer spending.

The significant cashflow and debt issues these companies face mean many are inevitably poised to fall into administration. However, this does not mean that they are unviable businesses and many could return to profitability if taken over by a serious buyer committed to turning the business around, particularly if consumer sentiment and economic conditions improve.

Take the retail sector as an example. While the sector has been battered for years, leaving many retailers in a perilous financial state, sales volumes and customer footfall figures have demonstrated considerable resilience in 2025.

This has led to a number of major deals involving physical retail businesses and assets that many buyers may not have considered looking at a few years ago, indicating that the sector is one that serious buyers eyeing high-value distressed opportunities should consider.

Industries that could define dealmaking in 2026:

TMT - At the end of 2024, the technology, media and telecommunications sector was widely tipped to be one of the most active of 2025, and so it has proved, with innovation and investment helping the sector establish itself as one of the most robust M&A markets, both in the UK and globally.

Unsurprisingly, this trend is widely expected to be prominent during 2026 as well. In the CMS report, 59 per cent of dealmakers polled said that they expect TMT to be the top sector for M&A growth over the next year, the highest of any industry and well ahead of second placed industrials & chemicals (42 per cent).

However, the sector also faced headwinds in early 2025. Q1 saw a dramatic 59 per cent drop in disclosed deal value to £3.8 billion, compared to £9.1 billion in Q1 2024, making it the second slowest quarter since 2018. Deal volumes fell 27 per cent quarter-on-quarter, reflecting macro uncertainty and the after-effects of Q4 2024's pre-Budget rush. Activity recovered somewhat in Q2, with volumes up 9 per cent and total H1 2025 reaching 307 deals, though the challenging start to the year highlighted the sector's sensitivity to broader economic conditions.

The most notable trend within TMT during 2025 was AI, which is reshaping everything from digital infrastructure to data centres and fibre infrastructure to media and entertainment. It seems practically a given that this will continue to define developments and dealmaking within the sector during 2026.

While the sector is perhaps more exposed than others to global challenges such as tariffs, supply chain disruption, regulation and general geopolitical uncertainty, the investment and innovation driving dealmaking will be strong enough for the sector to once again be an M&A leader in 2026.

In fact, issues such as supply chain disruption may become significant dealdrivers in their own right, as operators seek to de-risk and strengthen.

For an in-depth exploration of TMT M&A, check out our recent exclusive insight

Professional services - M&A across professional services industries has been thriving over the past few years, amid increasing demand, private equity-backed consolidation and widespread succession planning in markets with ageing owner populations.

Heading into 2026, however, professional services may also increasingly be driven by the need to boost resilience in the face of a more challenging market, either through securing private equity funding, building scale through M&A, or being acquired by a bigger rival.

According to a recent City AM report, UK professional services firms are being hit by issues such as the expansion of AI (which is already beginning to impact demand for outsourced services) and slowing revenue and profits following years of strong growth.

These pressures are emerging despite the sector's relative resilience: while overall UK deal volumes fell 20 per cent in H1 2024, professional services saw a smaller 10 per cent decline, and deal value actually rose 66 per cent to £68 billion, driven by larger strategic transactions and renewed PE interest.

The changing face of the industry has already been credited as a factor in a slew of major deals, including Apax’s £700 million acquisition of Evelyn Partners’ accounting business and RSM UK’s planned merger with US sister RSM US.

For smaller, less diversified firms, any reduction in demand for their services is likely to be even more damaging. With private equity still reported to be taking a strong interest in what remains a profitable, diverse and highly-fragmented market, fresh headwinds could result in a renewed wave of consolidation as smaller firms become more amenable to the idea of joining a bigger, more robust counterpart.

Financial services - Financial services is another sector that saw resilient M&A activity in 2025 and which is expected to see strong ongoing dealmaking during 2026. According to CMS, the sector topped the charts for deal value during the first half of 2025 as a result of a number of major transactions. There was close to €92 billion (approx. £80.7bn) in deals during H1 2025, up from €67 billion (approx. £58.8bn) during the same period of 2024.

In the broader European context, the UK led financial services M&A in 2024 by deal value at £95.5 billion, ahead of China's £81.8 billion, cementing its position as the premier destination for dealmaking in the sector. The banking sector, in particular, saw sustained momentum through 2025, with major UK deals including Coventry Building Society's £780 million acquisition of the Co-operative Bank, Nationwide's £2.9 billion acquisition of Virgin Money, and Barclays' £600 million acquisition of Tesco Bank, such deals reflecting the necessity for banks to grow, diversify revenue sources, and adapt to regulatory changes.

A notable recent deal was TEAM plc's acquisition of WH Ireland (November), which created a combined wealth management business overseeing more than £2.1 billion in client assets.

Explaining the wave of M&A in the sector, CMS UK partner Dipesh Santilale said: “Europe’s financial services sector is riding a wave of consolidation, convergence, regulatory, macroeconomic and generational wealth shifts. Private capital growth is driving new investment structures and strategies. Fintechs and challengers are evolving and consolidating, while banks, insurers and asset managers are looking for opportunities to capture a greater share of pensions and savings and invest in long-term growth and investment asset classes and semi-liquid products.”

Financial services was also named as one of the 5 most attractive UK industries for M&A in 2026 in the Plimsoll report, with 32 per cent of businesses in the UK financial services sector rated as highly-attractive, the third-highest score in the poll.

Plimsoll cites higher regulatory costs, shifting customer expectations and intensifying competition as key factors expected to encourage dealmaking. The report states that mid-sized firms will struggle to meet these challenges without increasing scale, while wealth managers, niche brokers and challenger banks will face pressure to either sell or partner.

Against this backdrop, Plimsoll says, larger, more established financial services firms with strong balance sheets will be well-placed to acquire smaller competitors, a trend it says is already visible and set to accelerate in the new year.

Estate agency - The estate agency market has been experiencing significant consolidation in recent years, driven by market pressures, widespread fragmentation and overseas investment, particularly from the US.

Just over two years ago, we described how a booming rental market had driven activity involving agencies with strong lettings offerings, while economic turmoil had impacted housing sales, leading to consolidation among vulnerable agencies focused on residential sales.

M&A has continued rapidly across the industry in the interim, with deals ranging from London-based consolidators such as Lomond to regional acquirers like Connells Group, from major buyers like Leaders Romans Group to smaller operators like Bristol Property Centre.

There have also been complementary acquisitions in areas such as property consultancy, property technology, mortgage brokerages and auctioneers, demonstrating the attractiveness of the wider sector.

This looks set to continue in 2026, with a recent Plimsoll report naming estate agents as the most attractive acquisition targets for the year, with 43 per cent of firms in the sector rated as “highly attractive.”

Plimsoll point out that, despite years of consolidation, the estate agency sector is still highly fragmented and that smaller local agencies represent ideal acquisition targets. Such firms may lack digital infrastructure, operational scale and brand recognition, while many will be under mounting pressure as a result of high interest rates and slow property deals.

“For larger agencies and tech-enabled platforms”, the report states, “acquisitions offer a direct route to greater market share and expanded reach. The ability to centralise marketing, listings, and lead generation makes scale increasingly valuable.”


While 2025 began on a wave of optimism, the year ultimately delivered a tale of two markets. Globally, M&A staged a spectacular recovery, but the UK's headline 20 per cent growth masked a profound transformation as domestic dealmaking collapsed to its lowest level since 2016, while foreign buyers, particularly from the US, drove a surge in inbound acquisitions.

This structural shift, with overseas acquirers accounting for nearly 40 per cent of UK M&A value last year, fundamentally reframes the outlook for 2026. A flurry of strategic acquisitions toward the end of the year, including the completion of DoorDash's £2.9 billion acquisition of Deliveroo in October, provided some optimism, but sentiment has been tempered by the weakness of domestic corporate dealmaking and persistent economic uncertainty.

At the outset of the year there are still plenty of factors that could drive a resurgence in M&A activity, with dealmaking appetite high, healthy M&A in a number of sectors and, perhaps most crucially, private equity firms under growing pressure to re-enter the market.

For companies considering M&A in 2026, whether first-time buyers or experienced consolidators, such an uncertain landscape can understandably give pause for thought, particularly amid such a tough financing environment.

However, as we have consistently seen, acquisitions are the fastest, most-reliable and often the most-effective means of attaining growth, something that will be vital for companies hoping to build momentum ahead of any potential economic recovery.

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