Welcome to January’s M&A Insights newsletter. As we enter 2026, the market is being shaped by two powerful and interconnected forces: the peak-value challenge facing private equity portfolios acquired at 2020–2021 valuations, and the gradual reopening of exit routes, particularly IPOs and structured secondary solutions.
Following a record-breaking 2025, with global M&A reaching $5.1 trillion, up 42% year-on-year, attention has now shifted from deal momentum to liquidity and exit execution. Sponsors holding assets bought at peak multiples are navigating a more disciplined valuation environment, requiring greater operational delivery, creative structuring and patience to achieve outcomes.
For UK business owners, this matters. As exits restart at the top of the market, capital must flow back down the chain. That process typically favours well-prepared mid-market businesses with resilient cashflows, clear growth strategies and credible leadership, particularly as private equity looks to deploy fresh capital into platform investments and bolt-on acquisitions.
Here’s a more detailed breakdown
Market Sentiment
- UK deal activity: 392 deals announced in December 2025, with an estimated 465 deals expected once delayed reporting is included (up from November’s 454+).
- Deal volumes: Up 2.3% year-on-year compared with December 2024.
- Deal value: Approximately £28.6 bn executed or announced during the month, lower than November’s £41.7 bn but consistent with seasonal patterns.
- Buyer mix: Trade buyers 63%; private equity direct 10%; PE-backed corporates 15%; listed companies 12%.
- Confidence: MarktoMarket UK Corporate Finance Confidence Index at 56, remaining firmly above the neutral 50 threshold.
Funding Landscape
- Interest rates have fallen to 3.75%, down from 5.25% in 2024, materially improving leverage capacity and deal economics.
- Private credit and asset-based lenders remain active, particularly for resilient, cash-generative businesses.
- Minority investments and hybrid capital structures are increasingly used to support growth while allowing founders to retain control.
- Cross-border capital continues to rise as valuation differentials make UK assets attractive to international buyers.
Global M&A
J.P. Morgan – 2026 M&A Outlook
- Global M&A reached $5.1 trillion across 45,191 deals in 2025, second only to the 2021 peak.
- Cross-border activity surged 49% to $1.3 trillion, driven by mega-deals exploiting valuation arbitrage.
- Technology and Diversified Industries each surpassed $1 trillion in deal volume, representing 43% of global activity.
Cross-Border Activity – UK Remains Attractive
- The UK ranked among the top global target countries with $131bn of inbound investment (+31%).
- UK and European assets continue to trade at a discount (8.3x median EV/EBITDA vs. 10.3x in the US), attracting US, Japanese and French buyers seeking relative value.
- Post-election regulatory stability and deep management talent continue to underpin inbound confidence.
Minority Stake Sales & Creative Structures
- Sponsor minority stake sales increased 38% year-on-year.
- Strategic acquirers accounted for 81% of minority stake buyers in 2025.
- Earn-outs, deferred consideration and continuation vehicles are increasingly used to bridge valuation gaps — particularly for assets acquired at peak pricing.
UK Private Equity:
The Peak-Value Challenge
- A significant cohort of assets acquired in 2020–2021 at elevated multiples is now approaching the end of their investment horizon.
- Sponsors are responding through:
- Continuation vehicles
- Bolt-on acquisitions to drive earnings growth
- Selective secondary sales
- Deferred consideration and structured exits
Operational discipline has replaced multiple expansion as the primary value lever.
Exit Environment, Signs of Re-Opening
- Sponsor-to-sponsor transactions and secondaries dominate current exits, but IPO routes are beginning to re-emerge.
- UK IPO reforms (streamlined prospectus rules and stamp duty incentives) are improving market accessibility.
- PE-backed IPOs more than doubled in the first three quarters of 2025, with proceeds up 68%, signalling improving exit optionality.
Global Private Equity
RSM UK – Deals and Private Equity Outlook 2026
- Q4 2025 was the strongest quarter for PE buyout completions.
- Dry powder remains near record highs — capital is available, exits are the constraint.
- 2026 is expected to be shaped far more by liquidity events than fundraising.
- As exits accelerate, capital recycling is expected to stimulate new platform investments and mid-market acquisition activity.
Key Takeaways
- The market is working through a valuation reset, not a collapse.
- Exit routes are reopening at the top end, which should unlock capital further down the market.
- Buyer competition is returning — selectively.
- Businesses with predictable earnings, strong cash conversion and operational clarity remain the most attractive assets.
In Conclusion
For UK business owners, the theme this month is positioning for flow-through opportunity.
As private equity works through the peak-value challenge and exits begin to accelerate via IPOs, secondaries and structured solutions, fresh capital will increasingly seek well-prepared mid-market businesses to deploy into.
Owners who invest now in leadership depth, operational discipline and a clear growth narrative will be best placed to benefit as this capital works its way back down the chain. In a market defined by selective confidence, preparation remains the strongest source of leverage.
As always, please don’t hesitate to reach out if you’d like to discuss how these dynamics could impact your business or strategic plans, or if you’d like us to explore any of these themes in more detail.
Whether you’re considering an exit, seeking growth capital, or planning for succession, we’re here to help navigate an evolving and increasingly opportunity-rich market. Get in touch here.
Charlotte
