Valuation gaps between buyers and sellers are driving a significant decline in private equity and venture capital-backed M&A activity in the UK this year, with data from the first three quarters of 2025 showing steep drops in both deal value and volume.
According to S&P Global Market Intelligence data, total transaction value (including both M&A deals and funding rounds) fell 45.6 per cent year-on-year to $29.82 billion (£22.6 billion) during the first three quarters of 2025, while deal volume fell from 1,097 during the first three quarters of 2024 to 890 during the same period of 2025.
Looking at M&A alone, transaction value during the first three quarters dropped to $15.91 billion (£12.1 billion), down from $42.37 (£32.26 billion) during the same period of 2024. M&A deal volume, meanwhile, has dropped from 183 transactions to 171.
James Cross, partner in the private equity team at Hogan Lovells, said that the decline in activity so far this year is directly linked to measures delivered in the Autumn Budget in 2024, which brought increases in employer National Insurance contributions and the capital gains tax rate. Describing the Budget as “very bad for business”, Cross said that the extra costs had proved a “significant blow” to M&A.
Other factors that have been cited as impacting deal activity include ongoing global macroeconomic uncertainty, persistent UK inflation and concerns over further potential tax and cost increases in upcoming Budgets.
Despite the fall in M&A activity, S&P quoted Raymond James Private Capital Advisory Michael Henningsen as saying that demand for high-quality businesses remained strong as a result of high levels of private equity dry powder.
The strongest UK private equity and venture capital dealmaking in the year-to-date was seen in the technology, media and telecommunications sector (TMT), which has emerged as the leading industry for M&A due to both strong fundamentals and ongoing innovation.
According to S&P figures, TMT investments over the first three quarters of the year totalled $8.03 billion (£6.1 billion) across 322 deals, more than half of which (170) were in the application software subsector.
TMT was followed by the financial sector, which saw a total deal value of $7.21 billion (£5.4 billion) across 70 transactions, including two deals worth at least $1 billion.
Another bright spot so far this year has been the private equity exit environment, with exits reaching over $30 billion (£22.8 billion) during the first three quarters of 2025, up from $21.3 billion (£16.2 billion) last year, while the volume of exits rose from 194 to 214.
While there were areas of stronger activity and appetite for dealmaking remains strong, the steep decline in M&A activity was cited as a key contributor to more muted private equity and venture capital fundraising. 2025 is on course to be well below 2024 in terms of fundraising, with Preqin Pro data putting the total during the first nine months of the year at less than half of the full-year total for 2024.
S&P quotes Arthur D. Little Head of Global Private Equity Practice Jonas Fagerlund, who says that PE firms have been forced to hold onto investments for longer in a slower M&A market. According to Fagerlund, a lack of M&A activity means private equity funds are struggling to generate the numbers required to prove strong performance, leading to fundraising taking longer.
Find out more about the factors generating strong dealmaking activity across the TMT sector
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