UK private equity investment cools in H1 2024, but rebound expected in second half of year, says KPMG

Mid-market* private equity investment activity in the UK declined by 11% in the first half of 2024, as challenging macroeconomic conditions persisted, according to KPMG UK’s latest mid-market Private Equity analysis.

The firm’s most recent M&A study revealed that 321 mid-market transactions were completed during the first six months of the year, representing a drop of 11% when compared to 360 transactions completed during the same period in 2023. However, against pre-pandemic M&A activity (H1 2019), 2024’s figure reflects an increase in activity of 25%, suggesting the market has begun to normalise.

It was a similar picture for the UK private equity market overall, with 656 deals completed during H1 2024, down 20% when compared to 822 transactions in H1 2023.

UK companies continued to remain attractive to international buyers, with inbound deals accounting for 42% of all M&A activity during the first half of 2024 – and almost half of those buyers were US-based.

Commenting on the findings, Alex Hartley, Head of Private Equity within Corporate Finance at KPMG UK, said: “Despite a slower start to the year, we’re optimistic that with greater economic and political stability, there are strong fundamentals for the M&A market to return to healthier levels of activity. Both private equity firms and lenders are back in the market looking to complete transactions, albeit the quality threshold for doing deals remains high.

“Currently, around two in three private equity deals are bolt-ons, and this strategy is likely to remain popular for those looking to grow and create value in the current environment.

“Our own pipeline going into the summer is strong, and we’re seeing a greater appetite for transactions, with a notable resurgence of deals across the Financial Services, Industrials and Technology, Media and Telecommunications sectors. There’s also growing interest in Consumer businesses, aided by improving consumer confidence.

“Looking ahead to the remainder of 2024, after a prolonged period of uncertainty, investors will now be looking at the UK as a more stable environment for investing into new businesses and realising portfolio assets. The focus on deploying capital is here to stay, as many private equity firms are sat on significant amounts of dry powder. Ultimately, the foundations needed for dealmaking have significantly improved over the last few months, and we expect activity levels will continue to rise in the second half of 2024.”