London sees slowdown in mid-market deals

London's Mid-Market Private Equity Faces Challenges

Mid-market private equity investment in London experienced a decline during the first half of this year, driven by economic uncertainty and broader geopolitical concerns. According to recent analysis from KPMG, the number of mid-market private equity deals in the city dropped by 14%, with only 168 deals completed.

This decrease reflects a larger trend of economic instability, influenced by factors such as ongoing geopolitical tensions and worries about the potential impact of U.S. tariffs on the UK market. These issues have created a challenging environment for both public and private investment sectors.

Key Deal Types in Mid-Market Activity

Despite the overall decline, certain types of transactions remained prominent in the mid-market space. Bolt-on acquisitions, where larger companies purchase smaller businesses to enhance their operations, continued to be the most common form of mid-market private equity activity. These made up over 50% of all deals in London.

Following bolt-ons were traditional and leveraged buyouts, where private equity firms acquire a majority stake in a company, as well as minority investments. These deal structures are often used to build or expand existing business models.

Characteristics of Mid-Market Companies

Mid-market companies typically generate annual revenues ranging from £10 million to £1 billion. Their investment is primarily driven by institutional investors, including pension funds and insurance companies. These entities seek stable returns and long-term growth opportunities, making mid-market companies an attractive target for private equity activity.

London Remains a Leading Investment Hub

Although the volume of mid-market private equity deals in London has decreased, the city still holds a dominant position in the UK market. London’s mid-market private equity backing accounts for 45% of the total in the country, thanks to its global reputation and extensive business infrastructure.

Helen Roxburgh, Partner and Head of KPMG’s London Region M&A team, noted that while there has been a dip in mid-market private equity activity, London remains a key player. She highlighted the city's strong talent pool, access to global capital, and concentration of high-growth businesses as major draws for investors.

National Trends and Economic Outlook

On a national scale, mid-market deal activity also saw a decline. Only 377 mid-market deals were completed in the first half of the year, representing an 11% drop. However, the slowdown was more pronounced in total equity investment.

Analysts had expected a continued rebound in private equity activity following the positive performance in 2024. Instead, the total activity reached its lowest level since the second half of 2020. Deal volumes fell by 17%, with just 726 deals closed nationally in the first half of 2025, compared to 876 in the same period in 2024.

The second quarter of the year also saw fewer deals than the first, with 356 deals completed compared to 370 in the first quarter. This trend indicates a slowing pace of private equity activity across the country.

Expert Insights on Market Conditions

Alex Hartley, Head of Corporate Finance at KPMG UK, explained that the initial expectations for increased M&A activity in 2025 were based on the strong deal numbers from the previous year. However, economic uncertainty—driven by geopolitical events and concerns over tariffs—has led to a more volatile market.

He added that securing deals has become more time-consuming due to these challenges. Despite this, Hartley believes that activity may pick up later in the year as business owners consider potential tax changes in the Autumn budget and assess the impact of global trade policies.

Investor Sentiment and Sector Opportunities

While the market remains cautious, investor appetite remains strong in certain sectors, particularly business services, media, and telecommunications. This suggests that although the current environment presents challenges, there are still opportunities for growth and investment.

Overall, the mid-market private equity landscape in London and the UK continues to evolve, shaped by both macroeconomic factors and sector-specific dynamics. As investors navigate these conditions, the focus will likely remain on strategic opportunities and long-term value creation.