London hit with a slowdown in mid-market deal activity
Mid-market private equity investment in London suffered a fall in the first half of this year, as economic uncertainty and wider geopolitical issues affected investment activity.
According to fresh analysis from professional services giant KPMG, the volume of mid-market private equity investment fell 14 per cent in the capital, with just 168 deals completed.
KPMG’s findings reflect an ongoing backdrop of economic uncertainty, influenced by geopolitical tensions and concerns surrounding the potential impact of US tariffs, which have plagued parts of the UK stock market and private investment in recent months.
Bolt-ons, where larger companies acquire a smaller business in order to strengthen its operations, remained the largest component of mid-market private equity activity across London, making up over 50 per of total deals.
This was closely followed by traditional and leveraged buy outs, where a private equity firm purchases a majority stake in a company, and minority investments.
Mid-market companies tend to earn revenue between £10m and £1bn with investment primarily driven by institutional investors, such as pension funds and insurance companies.
London leads
However, the capital is still leading the way, with its mid-market private equity backing making up 45 per cent of the UK total, due to London’s global standing and business offerings.
Helen Roxburgh, Partner and Head of KPMG’s London Region M&A team, said: “While there’s been a dip in mid-market private equity activity in London in the first half of this year, the capital is still leading the way”.
“London’s deep pool of talent, access to global capital and concentration of high-growth businesses make it a magnet for investors.”
National outlook
Only 377 mid-market deals were made nationally in the first half of the year, falling 11 per cent, but it was total equity investment that suffered a greater slowdown.
Despite analyst expectations that private equity investment activity would continue to pick up from its rebound in 2024, total activity dipped to its lowest levels since the second half of 2020.
Deal volumes dropped 17 per cent, with just 726 deals closed nationally in the first half of he year, compared to 876 in the same period in 2024.
The second financial quarter also witnessed fewer deals completed compared to the first, slowing down private equity activity, with 356 deals closed compared to 370 in the first.
Alex Hartley, Head of Corporate Finance at KPMG UK said, “As we headed into 2025 off the back of strong deal numbers last year, the expectation was that M&A activity would continue to pick up”.
“But economic uncertainty, driven by geopolitical events and nervousness around the impact of tariffs, has meant that the deals market has been slightly more volatile so far this year, and getting deals over the line is taking longer.”
He said, “We may start to see activity pick up over the rest of the year, as business owners contemplate potential tax changes in the Autumn budget and they have had time to assess any impact from global tariffs.”
Hartley added the mood surrounding private equity investment “remains cautiously optimistic” as investor appetite is strong in certain sectors, including business services and media and telecoms.