Challenging and uncertain market conditions suppressed UK private equity (PE) activity in the first six months of 2024, but positive economic news and political stability drove investors back to the table from August onwards. Find out more about trends and deals in this year of two halves.
The first half of 2024 brought uncertainty for UK investors: a snap general election, interest rates at a 15- year high, and global political change as people in more than 60 countries headed for the polls.
Things stabilised as the year progressed. In August, The Bank of England (BoE) reduced interest rates for the first time in four years as inflation neared target rates; in the final quarter, the new UK Government released its first Budget and the USA elected Donald Trump for a second presidential term.
All data in this review is sourced from PitchBook Data, Inc, and relates to transactions with an estimated or confirmed deal value of between £10-£500 million, or where the deal value was undisclosed. The figures on total deal value only include transactions where the value was publicly available.
PitchBook advises there’s potential for 2024 data to be revised upwards due to a lag in deals being reported.
Deal activity ramped up in the second half of the year as interest rates fell and global elections were completed.
Our analysis of UK deals in 2024 shows increasing confidence levels among UK PE. Deal volumes were up 12.3% compared to 2023.
The total value of deals (for which financial information was made public) remained relatively flat at £21.3 billion compared to £21.8 billion in 2023.
Total number of deals and aggregate disclosed capital invested by deal type
Bolt-ons remained the most popular deal type as funds deployed money where there was already a good growth story and cheaper multiples than platform deals. Amid uncertainty, they stuck to the classic buy-and-build method rather than seeking new platforms, which typically involve more leverage and greater risk.
Our data shows bolt-ons' share of the buyout market has steadily increased over the last 14 years. Between 2010-2024, they accounted for 61% of transactions on average, rising to 69% in the last five years.
In December 2024, UK-based software investor Hg Capital sold its bookkeeping automation platform, Dext, to Iris Software Group. Hg acquired Dext in 2021.
In April 2024, Hg Capital announced the acquisition of telecoms and IT services provider Focus Group. Prior to Hg's investment, Focus Group was backed by Bowmark Capital, which has held a significant minority stake since 2020.
In June 2024, Spanish environmental services firm Urbaser completed the sale of its UK business to FCC Servicios Medio Ambiente, a conglomerate formed by the Spanish company FCC and the Canadian Pension Plan Investment Board.
There were 470 transactions in Q4 2024, the strongest deal flow since Q4 2021 (472). October was particularly busy as processes accelerated in anticipation of the Government raising capital gains tax (CGT) in its first Budget on October 30, 2024. Some funds also pre-emptively issued carried interest.
Year-on-year, the volume of UK exits was down by 1.9%, compared to an increase of 19% in Europe. This could be because the UK IPO market plays an outsized role in shaping investor confidence even though IPOs aren’t the most common exit route (private sales to other companies or secondary buyouts are more prevalent). Challenges in the UK IPO market, such as low valuations or poor demand for new listings, could explain the relative discrepancy in exit activity.
Transactions with estimated or confirmed deal value of between £10-£500 million
2024 saw a strong return for the leverage debt markets, with bank and debt- fund credit appetite improving steadily throughout the year, underpinning increasing levels of PE activity. Lenders sought to expand deployment and began to compete more aggressively to win mandates. This was evidenced through larger numbers of responses and indicative terms from lenders in processes we ran ourselves, and improvement in pricing, covenants, and other terms. In particular, pricing from debt funds saw a material reduction in 2024, with interest rate margins falling by 50-100 pbs compared to the end of 2023. However, one aspect that hasn’t seen an equivalent return to the terms we had before the volatility generated by geopolitical issues, inflation, and the 2022 mini budget is debt quantum and leverage. With cost of funds (BoE base rate and SONIA) remaining high, lenders remain concerned about debt serviceability and so leverage remains relatively constrained. Lenders are being innovative and trying to respond. Lower margins have helped, but notably increased availability of PIK or non-cash pay interest. While January 2025 saw a continuation of the concern on inflation, which in part may limit further bank base rate cuts, lenders’ desire to deploy and support borrowers looks like it will be sustained, which is positive for borrowers’ options this year.
The volume and value of US PE deals increased in 2024 relative to 2023 when the PE-deal environment was soft, PitchBook data shows.
Deal drivers in 2024 included lower interest rates and financing costs and continued LP pressure for distributions. An improved IPO market also provided additional exit alternatives for PE firms and their portfolio companies.
We expect the number and value of PE deals in 2025 to surpass those in 2024, based on more stable interest rates and financing costs, increased optimism from business leaders following our most recent election cycle, an improved IPO market, and continued pressure from LPs for distributions.
We also anticipate greater PE-exit activity driven by the significant number of portfolio companies that have been held for longer than usual as firms waited for a more attractive deal environment (eg, lower interest rates, improved portfolio company financial performance, and higher multiples).
“The macro-conditions in 2024 provided a challenging backdrop for transactional activity.
However, UK businesses have proven very resilient over the last five years in what has been a turbulent macro-environment. We’re seeing signs of recovery and expect 2025 to be a positive year in terms of deal volumes in the UK as interest rates and inflation begin to ease.
There’s significant dry powder in the mid-market and we expect improving economic conditions to see a return of larger transactions.”
“2024 was a subdued year for PE deal flow, with global political uncertainty, rising debt costs, and economic headwinds all weighing on confidence.
Given the broader market dynamics, there continues to be a high level of investor appetite for quality assets which demonstrate organic growth and resilience.
We expect 2025 to bring more of the same, and we’re optimistic about the prospects for a differentiated, sector-focused, lower mid-market fund like ours.”
Breakdown of sector deal volume by deal type 2023-2024
Total volume: 739 (43% of all deals)
Sector share of bolt-ons & platform deals (%)
There were 16.2% more transactions in B2B products and services in 2024 than 2023. It continues to be the most popular sector for bolt-on and platform deals. The sector's readiness for digital transformation is an attractive feature, particularly in the context of emerging AI technology.
Total volume: 333 (19% of all deals)
Number of deals by sector-development capital
The number of transactions involving IT assets grew by 24.7% between 2023 and 2024. In the same period, the volume of IT development capital deals grew by a remarkable 54.8%. This reflects a growing number of funds willing to offer management teams more flexible structures, particularly in instances where processes have failed.
Total volume: 288 (17% of deals)
The number of transactions involving B2C products and services grew by 15.7% between 2023 and 2024. The sector's two biggest deals were completed after the Budget, suggesting that increases to employers National Insurance Contributions and the National Minimum Wage weren’t a deterrent.
Total volume: 189 (11% of all deals)
There were 6.9% fewer deals in financial services in 2024 compared to 2023. Year-on-year, the volume of buyouts fell by 11.5%, but transactions involving development capital rose by 35.
This reflects investment in digital transformation within the sector.
Total volume: 103 (6% of all deals)
Number of deals by sector - platform deals only
The total volume of healthcare deals remained flat year-on-year (103 deals in 2024 v 104 in 2023). Year-on-year, the number of total buyouts fell by 5.4%. However, there was a dramatic year-on-year spike in pure platform deals – 32 in 2024 v 20 in 2023. The increase was driven by transactions involving healthcare services, which were up from 14 to 24 year-on-year. Elderly/specialist residential and domiciliary care services were popular platform deal targets (five deals in 2023 v 12 in 2024). This suggests confidence in a sector underpinned by government spending and growing demand for end- services from an ageing population.
From a fund perspective, the Autumn Budget was better than expected and was received positively by most in PE.
However, increases in the National Minimum Wage and employer National Insurance Contributions, coupled with challenging input costs, may impact the performance of mid-market businesses in 2025. People-dependent sectors, such as retail and leisure, and healthcare, will be under particular stress. While we don't expect this to stall PE activity on the whole, it may impact valuations.
Though there’s a large volume of potential deals on the market, PE continues to search for quality targets that demonstrate high year-on-year growth, a strong management team, high margins, recurring revenues, tech-enablement, ESG practices, and an opportunity to internationalise.
For the past two years, PE has held on to stronger assets (in some cases through continuation funding) to maximise value while market conditions improve. The consequent pressure to return capital to LPs will help drive deal volumes in 2025.
Funds will also be under pressure to deploy dry powder accumulated during the challenging macroeconomic conditions of the past few years.
According to PitchBook, PE continues to grow its share of UK asset allocation, with growth further buoyed in 2025 by fast-emerging sub-sectors such as clean energy and AI.
These drivers, coupled with more clarity on economics and politics, suggest 2025 will be busier than ever for PE.
Our advisory team delivered 151 PE deals with an average size of £76 million.
We provided Five Arrows with tax structuring and tax due diligence services for its acquisition of asset-management data and software firm Rimes from EQT. In the same month, we advised Five Arrows on its acquisition of local government software specialist Springbrook from Acel-KKR.
We advised sports education specialist SCL Education and Training on its sale to Queens Park Equity. SCL delivers study programmes to 16-19-year-olds with enrichment focused on sport and performing arts.
We advised Axis Europe on its merger with CLC. The deal was funded by H.I.G. European Capital Partners, which acquired CLC in June 2023. Axis provides maintenance services for social housing and public stock, while CLC provides engineering services.
