Sluggish pace in mid-level business transactions observed in London
London continues to lead the way in mid-market private equity backing, accounting for 45% of the UK's total mid-market private equity backing. However, the first half of 2025 has seen a slowdown in deal activity, with a 14% decrease in mid-market private equity investment in London.
According to KPMG's analysis, economic uncertainty and geopolitical issues have played a significant role in this slowdown. The mood surrounding private equity investment remains cautiously optimistic, but deal-making has become more volatile, elongating the timeline to close transactions.
Bolt-ons accounted for over 50% of total mid-market private equity activity in London, with traditional and leveraged buyouts, and minority investments following closely behind. The total number of mid-market deals made nationally in the first half of the year decreased by 11%, with only 168 deals completed in London during this period.
The second financial quarter witnessed fewer deals completed compared to the first, further slowing down private equity activity. Despite this, the sector focus remains strong, with continued interest in business services, healthcare, technology, media, telecoms, and industrials. The growing trend towards sustainability and artificial intelligence is also driving sector growth.
Healthcare/life sciences is growing in market share in Europe, including London, aided by the increasing focus on sustainable and innovative solutions. The middle market offers advantages such as less competitive bidding, flexibility, and better risk-adjusted returns, making mid-market investing especially attractive during 2025’s uncertain climate.
While interest rates have been cut in the UK compared to earlier in the rising cycle, they remain relatively high, affecting leverage multiples for deals. Private debt markets benefit from floating rate loans, enabling attractive underwriting opportunities at more conservative leverage levels. Anticipated momentum towards lower rates and bank capital reforms may support a stronger deal environment in the second half of 2025.
Growth in secondary market transactions, both LP- and GP-led, is also helping to maintain momentum. Managers are addressing multi-year backlogs and seeking liquidity solutions through secondary market transactions.
Alex Hartley, Head of Corporate Finance at KPMG UK, stated that economic uncertainty and geopolitical events have made the deals market more volatile. However, he expects activity to pick up over the rest of the year due to potential tax changes in the Autumn budget and the assessment of any impact from global tariffs.
Helen Roxburgh, Partner and Head of KPMG's London Region M&A team, stated that London is still leading the way in mid-market private equity, with its global standing and business offerings contributing to its dominance in this market.
In summary, London’s mid-market private equity investment in 2025 is navigating slower deal activity due to macroeconomic and geopolitical uncertainty, somewhat elevated interest rates influencing capital structures, but with sustained sector interest and growing secondary market activity helping to maintain momentum.
- Economic uncertainty and geopolitical events, as stated by Alex Hartley, have made the mid-market private equity deals market more volatile.
- Despite the slowdown in deal activity in the first half of 2025, London continues to lead in mid-market private equity, a testament to its global standing and business offerings, according to Helen Roxburgh.
- With the growing trend towards sustainability and artificial intelligence, sectors like business services, healthcare, technology, media, telecoms, and industrials continue to attract interest in the mid-market, offering potential for attractive returns in the uncertain climate.
