Private equity activity in the UK saw a notable recovery in 2024, with deal values reaching their highest level in two years, driven by an improved economic climate and anticipation of tax changes, according to data from KPMG UK.
The firm’s annual UK Private Equity Review highlights that the total value of transactions rose by 4.4%, reaching £158.9bn across 1,699 deals, marking an almost 12% increase in deal value from the previous year.
This growth was attributed to several factors, including falling interest rates and inflation, increased political stability following UK elections, and a surge in deals ahead of expected changes to Capital Gains Tax.
Alex Hartley, Head of Corporate Finance at KPMG UK, noted that the data from 2024 suggests that UK private equity activity may have bottomed out in 2023. “We saw a strong pick-up in activity, particularly in the second half of the year, as business owners sought to act before anticipated changes to Capital Gains Tax,” he said. “There is cautious optimism that this momentum will continue into 2025 and 2026.”
Mid-market private equity transactions surged in the second half of 2024, with volumes reaching their highest level in over three years. Overall, mid-market deal volumes increased by 15.5% compared to the previous year. However, despite the increase in volume, total deal value decreased by 9.1% to £44bn. This decline was attributed to smaller deal sizes, with privately owned businesses rushing to complete deals before the Autumn Budget and expected Capital Gains Tax increases. The volume of bolt-on investments also saw a significant rise, up 17.5% year-on-year.
The Technology, Media, and Telecommunications (TMT) sector emerged as the standout performer in 2024, with deal volumes rising nearly 19% and total deal values increasing by almost 58%, surpassing £40bn in total value. Business services continued to dominate the private equity landscape, accounting for 43% of all deals, up over 10% from the previous year.
While deal volumes in Financial Services and the Energy sector declined, the value of deals in both sectors outstripped their deal volume. Financial services made up 11% of the deals but contributed 14.6% of the total value, while energy accounted for 3% of deals but 4.7% of the value, highlighting the higher value deals in these areas.
Consumer Goods and Retail also saw a positive shift, with deal volumes increasing by 5.3% to 138, and deal values rising by 21% to £10.7bn, reflecting a recovery in consumer confidence throughout the year.
Looking ahead to 2025, KPMG UK’s experts expect the positive trend to continue. Hartley predicts that platform and buy-and-build strategies will continue to dominate, particularly in the Business Services and TMT sectors, where private equity firms will drive growth through strategic acquisitions. He also highlighted that the energy sector is likely to become increasingly attractive, with a focus on renewable energy investments as the UK intensifies its commitment to sustainability.
