UK M&A Industry Trends: The stars are aligning for deals

For the past year or so, we have watched momentum build in the UK deals market. The means and motives are there - financing is available and there's a need for new technology and high pressure on investors to realise returns. Yet dealmakers have held back. This year, conditions look set to become more favourable prompting an upswing in activity.

Headline figures for UK M&A are encouraging: deal values jumped by an impressive 37% in 2024, led by the financial services, technology, media and telecoms and services sectors - with many of the largest deals done by corporate buyers rather than private equity.

UK deal volumes are also outperforming the wider EMEA region, by a considerable margin. Datasite and Mergermarket’s own data supports our analysis, showing that almost a fifth of the EMEA ‘companies for sale’ at the start of 2025 – 299 in total – are based in the UK and Ireland.

UK deal values, 2019–2024

Improved conditions

There are strong indications that M&A activity began to pick up last year, and that there's much more to come as markets develop. Deals need the right environment to flourish, with a number of factors pointing to increased activity:

• Political, fiscal, and regulatory stability. A stable political environment and lower interest rates are good news for deals and while interest rates are not expected to fall dramatically, stability means that dealmakers are becoming more comfortable with pricing expectations. The Competition and Markets Authority’s announcement that it will focus its attention on ‘truly problematic mergers’ was also welcome news for dealmakers.
• The weak pound and US ‘overspill’. The UK has long been a favourite destination for US dealmakers, and it’s about to look even better. The Trump administration is promising deregulation and tax cuts, which would normally fuel domestic deals activity. But valuations are already high in the US which, combined with a strong dollar, is pulling buyers across the Atlantic on an even greater scale than before. The weak pound and stable economic environment is a magnet for deals; with global CEOs naming the UK as their second most favoured destination for capital expenditure, behind the US, in our latest UK CEO Survey.
• Private equity’s deployment pressure. Deals activity hit a peak in 2021, which means that a lot of PE investments are beginning to overstay their welcome. Investors want returns, and PE houses are facing pressure to show investment returns ahead of raising future funds. They can’t (and won’t) hold back much longer.
• Multiple and plentiful sources of capital. Sovereign wealth funds in the Middle East are shifting their attention to domestic investments that align with transformative national programmes, but the gap has quickly been filled from increasingly diverse sources. Blackstone’s Private Equity Strategies Fund, for example, raised more than $6bn in the nine months since its launch.

Intent to reinvent

This improved set of conditions for dealmaking comes as UK business leaders feel the pressure of intensifying challenges - with 98% of CEOs looking to make material changes to their business or operating model this year, according to our CEO Survey. Their motivations are both proactive and reactive.

• Future-proofing. Some 34% believe their business won't be economically viable within 10 years on its current course - up from 21% last year. In response, they plan to progress bold investments in their workforce and in their scaling of emerging technology to determine a future for their business that delivers long-term growth and lasting resilience.
• Appetite for technology. UK CEOs remain committed to technology investments and the role technology will play in creating change - despite experiencing a bit of a 'reality check' around Generative Artificial Intelligence (GenAI). Our CEO Survey shows 61% are investing in AI and GenAI, cloud, data and analytics to drive transformation - and we expect this appetite to power deals across all sectors as companies accelerate their transformation.
• Sector convergence. CEOs' moves to future-proof their businesses are leading to some blurring of sector lines. AI-driven activity is not restricted to specific sectors or constrained by traditional boundaries - and it boosts activity in supporting industries, including software and professional services. Increased use of AI leads to an increase in datacentres – which in turn require energy to power and cool, as well as digital and physical infrastructure such as roads and homes to house the people who work there. This blurring of lines is prompting deals such as Google’s arrangement with nuclear specialist Kairos Power and Microsoft’s with Constellation Energy and Brookfield Asset Management.

Dealmaking differentiators

Our research shows deals activity is increasing, and that the UK will be high on investors' list. Across the globe, 81% of companies who have made a significant acquisition in the past three years plan to make one or more acquisitions in the next three, our CEO Survey confirms. It's inevitable there will be winners and losers amid the activity – so what are the differentiating factors for dealmakers?

• The business model. The long-term validity of the business model is a critical question. Investors are approaching deals methodically, making sure that business models of the companies they select correlate with their own mid-to-longer term views around demographic and technological trends, and the likely impact on consumers and business demands. This has driven a significant increase in investment across sectors where positive change is needed, and where investors can clearly see the likely trends.
• Strategic thinking. There is a pressing need for business leaders to instigate material change to their business models. Our CEO Survey shows that since the pandemic, there has been a growing undertow dragging at the confidence of CEOs as the rate of change they experience has accelerated, particularly in a low growth environment. As such, there's a need to commit to a bold longer-term vision, and take significant, tangible steps towards it - this is the time to explore and embrace new sources of strategic thinking.
• AI skills and capabilities. Business and sectors leading AI implementation will see the most growth and attract the most skills and investment. Some 47% of UK CEOs cite skills gaps as the biggest barrier to adopting emerging technology. Dealmakers will therefore be looking for management teams with not just the right skills – to understand disruption and what it means for their business – but the right mindset to successfully lead the business towards growth.
• Relevance and resilience. Operational resilience remains important, with the need for companies to systematically review and rethink their value chains, distribution channels, customer communications, technology platforms and all other aspects of operations.

While the forthcoming upswing in dealmaking is welcome news, extracting value from deals has become more challenging with growth at low levels across Europe and the UK. Investment success in this environment will depend on the ability to understand businesses - how they will evolve and thrive in a rapidly changing environment - and to understand market trends and sector dynamics. It will mean consistently testing business models and introducing critical thinking into strategic planning. And it means embracing technological change without overcommitting. It’s a big ask – but whoever said dealmaking was easy?