During 2024, PKF UK and Ireland completed c200 deals worth £3.4bn in value, which is a staggering 50% increase in deal volumes from the prior year. As we step into 2025, this year promises to be an exciting one, filled with opportunities. Our corporate finance experts share their predictions for 2025.
M&A trends and predictions for 2025
- Similar levels of M&A activity to 2024
- Further consolidation of technology, healthcare, professional services and business services sectors
- Shift from growth-focused value creation strategies to operationally-driven (investors need real valuation creation stories)
- Decreasing interest rates to fuel consumer spending and business investments, in addition to reducing funding costs for M&A deals
- Increased appetite from international buyers betting on the stability the UK offers
- Continued availability of ‘dry powder’
- Potential for increased US restrictions on international deal activity
“A resurgence” of M&A activity in the UK
Darren Hodson, Head of PKF Corporate Finance in the Midlands, comments: “The mergers and acquisitions (M&A) landscape in the UK is set to be dynamic in 2025. Despite the economic uncertainties, private equity investors are optimistic about the opportunities that lie ahead. We can expect a continuance in the resurgence of M&A activity, with further consolidation in the technology, healthcare, professional services and wider business services sectors. The shift from growth-focused to operationally-driven value creation strategies will be a key trend meaning that the valuation creation story of an investment needs to be strong. Interest rate cuts are anticipated to stimulate deal-making activities.
“Additionally, the changes to capital gains tax were not as severe as expected, which potentially will lead to stability in the M&A market with appetite from lots of acquisitive businesses seeking exiting shareholders.”
The state of the economy and its impact on M&A
Claire Spencer, Corporate Finance Partner, said: “Globally, the economy is forecast to grow solidly in 2025, with a projected growth rate of 2.7%. The US is expected to outperform expectations, while the Euro area may lag behind due to fresh tariffs and trade uncertainties.
“In the UK, the economy is showing signs of renewed momentum, with GDP growth expected to rise b c.1%-1.5% in 2025. Measures from the Autumn Budget will likely have a mixed impact; the increases in wage costs will impact growth in some businesses, although many are very resilient, but the investment in infrastructure/desire to build will create more employment and growth in the construction and utilities sectors.
“This should be positive for M&A, although we are still to understand the impact of both the UK and US election results.”
Impact of decreasing interest rates
Tom Joy, Corporate Finance Director, noted: “Interest rates in the UK are expected to continue their downward trend in 2025. The Bank of England cut rates twice in the last 12 months, bringing down the base rate to 4.75%. Further cuts are anticipated, with the base rate potentially dropping to around 3.5%. This will have a positive impact, promoting consumer spending, business investments, and providing a much-needed boost to the economy. For M&A, it means funding costs will reduce, leverage can increase and this will support more deals.”
Importance of international buyers
David Crump, Corporate Finance Director, commented: “The strength of the US dollar is expected to increase, and that means US purchasers are likely to be keen to acquire UK assets. The Euro will remain steady, but many European purchasers will like the certainty that the UK now brings following Brexit, so we expect the number of European purchasers to also increase.
“The US may also be looking to bring in more regulations around M&A, and this is something to watch over the coming year.”
Hot sectors for M&A activity
Claire Spencer said: “Several sectors in the UK are poised for significant growth in 2025. The energy, technology, and healthcare sectors are expected to lead the way in M&A activities. Strategic growth areas and economic stability will keep the UK’s dealmaking outlook lively. Investors should keep an eye on these sectors as they present promising opportunities for growth and innovation.”
Darren Hodson reaffirmed that there is plenty of ‘dry powder’ around: “The availability of money for M&A in the UK is expected to remain strong. The Autumn Budget and macroeconomic factors will shape the environment, with private equity leaders preparing for a busy year ahead.”
In terms of whether 2025 will be a buyer’s or seller’s market, David Crump concluded there was likely to be a balance. “Interestingly the UK housing market in 2025 is expecting to have more sellers than buyers despite the reduction in interest rates. This is not as certain for corporate M&A, and we were on the cusp of the market becoming a seller’s market, but this may now depend on the actions of Trump and Starmer as both have a growth agenda, but through different ideologies.”
Closing view on 2025
With a promising economic forecast, favourable interest rates and increasing investor appetite, it is clear that 2025 will be a good year for M&A. Embracing the opportunities and navigating any challenges with optimism and resilience will prove key to capitalising on the market. Contact us today to find out how we can make your next business move a success.