UK private equity deal activity on track for steep annual decline

Private equity- and venture capital-backed deal activity in the UK is on pace to fall significantly in 2025, as the gap in valuation expectations between buyers and sellers continues to slow transactions.

The total transaction value fell 45.6% year over year to $29.82 billion in the first three quarters of the year, while the number of deals declined to 890 from 1,097 in the third quarter of 2024, according to S&P Global Market Intelligence data.

Alone, the private equity M&A deal value fell to $15.91 billion year over year in the third quarter from $42.39 billion. The value of funding rounds, however, rose 12% over the period to $13.90 billion.

Market players continue to navigate a persistent valuation gap between what sellers expect and what buyers are willing to pay, said Michael Henningsen, managing director at placement agent Raymond James Private Capital Advisory.

"This dynamic is driven by many factors, including ongoing global macro uncertainty, as well as more UK-specific factors such as the overall slowing of the economy, persistence in inflation, recent national insurance changes and the upcoming budget announcement," Henningsen said.

The drop in the number of deals in 2025 can be attributed to the autumn budget delivered by the UK government in October 2024, said James Cross, a partner within Hogan Lovells' private equity team.

The autumn budget introduced measures such as an increase in an employer's share in national insurance contributions and an increase in the main capital gains tax rates, according to accountancy and advisory services firm Gerald Edelman LLP.

"The October 2024 budget from our government was very bad for business," Cross said, adding that businesses having to take on the extra costs was "a very, very significant blow to the M&A market."

Amid the decline in dealmaking, demand for high-quality businesses remains strong, driven by dry powder available to private equity managers, Henningsen said.

– Download a spreadsheet with data featured in this story. – Read about the global venture capital rounds of funding in October. – Catch up on private equity fundraising in the UK during the first half of 2025.

Fundraising slump

Fundraising totals by UK-based private equity and venture capital funds also declined in the first nine months of 2025. From January to September, the total was $41.6 billion, less than half of the $86.51 billion recorded for full year 2024, according to Preqin Pro data.

Muted private equity deals hampered fundraising launches, said Jonas Fagerlund, head of global private equity practice at consulting firm Arthur D. Little Ltd.

"Private equity funds have been forced to hold on to the targets longer in their portfolio. Therefore, it will also take longer for them to raise a new fund as they don't have the numbers in their book yet to prove that they perform very well," Fagerlund said.

Quality assets drive exits

Private equity exits have been a bright spot in the UK, reaching $30.40 billion in the first three quarters of 2025, up from $21.33 billion over the same period in 2024.

By volume, the number of exits rose to 214 from 194 between January 2024 and September 2024.

The uptick in exits was driven by the sale of private equity's "strongest and most attractive performers," largely in the financial and healthcare sectors, where strategic corporate acquirers remain active and private equity interest is high, according to Henningsen.

"This is partly in response to significant pressure from their own investors who are keen to see capital returned after longer holds and a relatively quiet period for liquidity," Henningsen said.

The largest private equity-backed exit in the UK so far in 2025 is the pending $7.76 billion sale of Pension Insurance Corp. Group Ltd. by an investor group, including CVC Capital Partners PLC and HPS Investment Partners LLC, to Athora Holding Ltd.

Largest deals

The UK's technology, media and telecom (TMT) sector secured the largest amount of private equity investments in the first three quarters of 2025, totaling $8.03 billion across 322 deals.

Of the TMT deals, more than half, or 170, were in the application software subsector, followed by IT consulting and other services with 32 deals.

The financial sector came in second, with transaction value totaling $7.21 billion across 70 deals. This was driven by two deals with at least $1 billion in transaction value.

KKR & Co. Inc. had the largest deal in the UK through the end of September, agreeing in April to acquire financial workflow solutions company Osttra Group Ltd. from CME Group Inc. and S&P Global Inc. for $3.1 billion. The deal closed in October.

In another private equity-backed deal in the financial sector, TDR Capital LLP completed in February its majority investment in business acquisition compounder CorpAcq Ltd. for $1.22 billion. This is the third-largest private equity deal in the UK so far this year. As part of the transaction, Goldman Sachs Asset Management LP reinvested to become a minority stakeholder.