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      The bigger picture: Assessing AI’s real impact

      Supported by strong tailwinds coming off an active close to 2025, Q1’26 initially saw deal volumes rise (up 3.9 percent versus the same period last year). Yet concerns about the wider impact of AI across a wide swath of sectors – coupled with geopolitical uncertainty – led to a 10 percent drop in deal volume in Q2’26, contributing to an overall 3.4 percent year-on-year decline in volume over the half.

      What investment committees are looking for are assets with some sort of protective AI moat around their revenues – including so-called Heavy Asset, Low Obsolescence or HALO companies. Not surprisingly, activity slowed somewhat in the TMT sector (down 3.7 percent on the half) and in Business Services (down 5.9 percent). Healthcare, on the other hand, rose more than 9 percent, albeit off a fairly low base.

      Alex Hartley
      Alex Hartley

      Partner, Head of UK Corporate Finance

      KPMG in the UK

      Naveen Sharma
      Naveen Sharma

      Partner and UK Head of Private Equity

      KPMG in the UK

      While TMT and Business Services will continue to represent the bulk of the deal flow in the UK, we’re seeing several investors refocus towards more ‘blue collar’ services businesses that offer secure, sticky recurring revenues, as well as industrials assets that provide reliable long-dated pipelines.
      Jonathan Read
      Jonathan Read

      Head of UK Financial Sponsor Coverage, Corporate Finance

      KPMG in the UK

      Bolt ons keep the momentum going

      With valuations in certain sectors at recent lows, many fund managers continued to execute on their rollup and platform plays. Bolt-ons once again remained the largest component of mid-market deal activity in the half, representing 61.8 percent of mid-market deals (up from 56.1 percent in H1’25), followed by minority plays (17.1 percent of the deals in the half).

      A big story this half was around take-privates. EQT’s £9.4 billion bid for Intertek is the largest public-to-private deal in the UK in nearly 20 years. But competition from foreign players has been fierce – as evidenced by the battle to snap up EasyJet.

      The exit challenge intensifies

      Indeed, all signs suggest this exit backlog will continue to represent one of the greatest challenges for UK PE firms heading into the second half. Just 96 exits were completed in the first half, down nearly 30 percent year-on-year. TMT and Consumer Goods saw exit volumes plunge 46.4 percent and 54.5 percent respectively.

      On the bright side, however, those deals that did get done were chunkier than normal. Exit values doubled over the same half in 2025, reaching £23.4 billion in total. Trade acquirers remained the preferred exit route accounting for 51 percent of exits, followed by secondary buyouts (46 percent of exits). 

      With holding periods continuing to extend, PE firms are keen to exit businesses where they can. But uncertainty in the economy, compounded by deep concerns about the risk of AI disruption, has made exits harder to achieve.
      Naveen Sharma
      Naveen Sharma

      Partner and UK Head of Private Equity

      KPMG in the UK

      Outlook H2’26

      While the second half may start slowly as PE firms and investors assess what approach a Burnham government will take towards tax, we expect investment committees and dealmakers to start to gain comfort around the impact of AI on certain segments. And that should help investors ground their valuation expectations and help lift overall volumes. Even so, expect properties with the deepest moats to capture the greatest attention.

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      Naveen Sharma
      Naveen Sharma

      Partner and UK Head of Private Equity

      KPMG in the UK

      Alex Hartley
      Alex Hartley

      Partner, Head of UK Corporate Finance

      KPMG in the UK

      Jonathan Read

      Head of UK Financial Sponsor Coverage, Corporate Finance

      KPMG in the UK

      Our advisory insights

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