Indicators point to UK private equity deal-making uptick

While some major private equity transactions completed – such as deals for Hargreaves Lansdown and Grant Thornton – the overall picture in 2025 was one of fewer deals being done.

Buyers were very selective in committing funds, focusing on high-quality assets in industries promising opportunities for good growth, consolidation, and scalability, as well as where business models were seen as ripe for streamlining – including through use of technology. In that context, businesses active in the technology sector, as well as those involved in healthcare, professional services, and energy transition, continued to be popular targets.

Otherwise, there was a preponderance of caution in the market, reflecting underlying geopolitical and economic uncertainty. We saw a tendency for investors to deploy capital in assets and sectors they were already familiar with, whether via existing portfolio companies or new platform deals in sectors where they have previously generated strong returns, where sellers were able to present a very compelling offering.

Often those deals were more likely to be bolt-on acquisitions, integrated into existing PE-owned companies, rather than larger platform deals – though we did see these also – that can form the foundation for broader strategies focused on realising value from a series of acquisitions, either through achieving operational improvements or via plain arbitrage, or both.

That said, there are still opportunities for investors that are willing to start small, by identifying the right management team or company to serve as a smaller platform. Those targets can often be acquired at a lower price and provide the anchor for a proactive bolt-on programme that can deliver the sort of scale that will allow investors to achieve the desired exit multiples. Investors that are willing to be hands-on and that are confident with their ability to harness and drive value creation are realising the benefits of this investment strategy down the line.

Another trend we are seeing in the deals we advise on is an increase in the average lifespan of investee companies. Over the past couple of decades, it has typically been the case that general partners (GPs) would look to achieve an exit within three to five years. Now, we are seeing a growing number of investors holding onto assets beyond this previously typical period, with six and seven years becoming increasingly common.

There are some good reasons for this. GPs have found it hard to achieve or demonstrate the value growth expected from their intended investment case within typical timeframes, and this has coincided with would-be buyers tending to be more selective for what they perceive as quality assets. This, coupled with mismatches between some buyer and seller valuations and a lack of appetite among some private companies in the UK to achieve an exit through an initial public offering (IPO), means investors have chosen to hold onto assets longer – with a view to achieving what they consider the right overall return over longer ‘hold’ periods.

This approach can, though, clash with the need of limited partners (LPs) to access cash from their investments. This has put pressure on GPs to find ways to deliver returns at times when they feel they cannot realise full value via a conventional third party sale or IPO.

One way that GPs have chosen to address this conundrum is through the use of continuation vehicles, where instead of being sold at the end of an investment period, an asset is moved from one fund to another within the same private equity house. This option lets GPs achieve an exit for – and deliver some returns to – those LPs that want it, while enabling them to retain control of the assets until such time as they feel they can achieve better returns via an exit.

Previously, continuation vehicles had perhaps been considered solutions for problem assets where an exit at a respectable value was unrealistic. Now these vehicles are morphing into solutions that allow an exit for existing LPs at a value that has been tested but where investors consider there still to be upside to be generated. For similar reasons, anecdotally, we have seen an increase in PE investors reinvesting value into PE buyers’ structures as a minority co-invest. PE buyers are becoming increasingly comfortable with these kinds of arrangement.         

The caution in the market is perhaps also reflected in the number of secondary transactions we saw in 2025, where one private equity house buys out another. These deals made up the bulk of major warranty and indemnity (W&I) insurers’ PE-related books last year and were so popular that it altered insurer practices in the market. Equally, with the increase in minority structures, insurers had to adapt their W&I policies, including moving to a more commercial position without prorating loss.

Towards the end of 2025, we began to see an uptick in activity – and this has continued into early 2026. We have already seen an increase in the number of investment memoranda circulating for new platform processes, with a wider acknowledgement of the quality of the assets being marketed, which we consider a good sign of things to come, as well as a rise in management buy-in deals being mooted. Traditionally, these are good bellwethers for subsequent deal-making.

There are further reasons for optimism: according to Pitch Book data, there is almost €2 trillion of private equity capital ready to be committed globally and around 30,000 private equity portfolio companies waiting to exit – at a time when limited partners are increasingly agitated about how long their funds have been tied up in assets for. Management teams also know that, in a relatively flat economic environment, they need to be on the front foot pursuing opportunities to consolidate, to grow, to invest, and that they will find it harder to achieve the results they want at the end of an investor lifecycle where funds may not be readily available to support growth initiatives. This year, we are already seeing the gap between buyer and seller valuations reducing too.

These factors, in and of themselves, hold the promise of creating momentum for deals.

The continuing volatile geopolitical situation is one potential dampener on deal-making, with war in the Middle East the latest major development in a fractious world. However, as we have seen through the pandemic, energy crisis and war in Ukraine, buyers and sellers have proved to be resilient and adaptable when the situation demands and we expect this to be the case as the situation evolves.

Prior to the latest conflict, we had already seen a softening of private equity houses’ approach to investing in defence assets amidst major commitments by European governments – including the UK’s – to increase defence spending over the next decade. While we expect that many investors will remain reticent about investing in weaponry in light of ESG obligations, we are seeing some private equity investors explore opportunities to invest in companies likely to increase in value amidst the defence spending drive, where their technologies, products or services have a potential civilian, and not just military, use – such as cybersecurity, drones and autonomous systems.

One technology we expect to continue to have a major disruptive effect on private equity investment strategies is AI.

As part of their due diligence processes, we anticipate prospective investors will take a close look at whether business models and growth are sustainable in light of the evolution of AI. Even relatively new ways of operating are not necessarily immune from AI-related disruption. The recent reaction of public markets to the launch of AI tools such as Claude Cowork and speculation as to their impact on ‘software as a service’ business models in the cloud computing market, which have been favoured by private equity houses for delivering high margins and recurrent revenues, is an example of how AI is being viewed as a potential threat to valuations.

AI is also changing due diligence and insurance underwriting processes themselves too, supporting advisers with reviews of contracts, leases and other documents, and in summarising main findings. It is also supporting insurers with pricing and determining scope of initial coverage.

As AI becomes more embedded in deal-making processes, it will put a growing emphasis on better presentation of data – by would-be sellers and their advisers – to enable buyers to identify issues more easily. Those that can do this effectively may stand a better chance of completing a sale.

Co-written by Kieran Toal of Pinsent Masons, Simon Cope-Thompson of Arrowpoint Advisory, and Thomas Baker of Wiispa.

Download our PE M&A Trends report 2026 (40-page / 4.27MB PDF)