A month after Liberation Day, M&A activity continues

In the aftermath of “Liberation Day”, the repercussions of Trump’s tariffs on US growth and the UK’s economic uncertainty have been felt, but mid-market M&A is still thriving, according to Mark Brockway, a corporate finance partner at S&W. Despite concerns about the future stemming from these challenges, some business owners view this as a critical moment to sell before circumstances potentially worsen. M&A activities in the mid-market segment, deals under £100 million, have remained robust and slightly above the average in recent years. S&W, along with partner firms in Oaklins International, closed 385 deals in 2024, indicating a healthy deal flow. In the first quarter of 2025 alone, they took on over 100 new M&A mandates.
Buyer interest in 2025 was initially boosted by a more promising economic outlook, supported by the stabilization and subsequent decline of rising interest rates in 2024. Additionally, vast amounts of uninvested capital held by private equity firms globally (approximately $2.1 trillion) further facilitated deal activity by keeping prices relatively stable. Despite price adjustments in certain sectors like technology post-COVID, they remain competitive when compared to historical averages, prompting some business owners to make the decision to sell. Brockway notes that market challenges, such as tariffs and global trade concerns, have not completely overshadowed opportunities for business owners. However, there are significant obstacles faced by clients due to recent tax changes that impact their profitability and valuation multiples, highlighting the complexities of navigating current economic conditions.
The upcoming changes in national insurance, capital gains tax increases, and alterations to inheritance tax laws present additional hurdles for entrepreneurs seeking to pass on their businesses or wealth. For many families with businesses exceeding £1 million, these changes may necessitate selling equity stakes or the entire business to cover inheritance tax liabilities. With a limited timeframe to act before these changes come into effect, business owners are faced with critical decisions in the near term. In light of economic uncertainties like the forecasted growth reduction for 2025 and the potential impacts of newly imposed tariffs, many business owners are considering selling sooner rather than later due to concerns about stagnant valuations and increasing taxation.
Despite these challenges, business owners still have options, such as partial sales to private equity firms, which have been instrumental in driving M&A activity in recent years. This approach allows owners to realize some capital while retaining a stake in potential value growth. The rise of “buy-and-build” transactions, where PE investors acquire owner-managed businesses to add to existing portfolios, has also contributed to deal volumes in the mid-market segment. Brockway emphasizes the importance of focusing on technology-driven businesses and those with stable, recurring revenues as attractive targets for investors in the current economic landscape. However, it is essential to note that while deals are still closing, the process is becoming lengthier, with sale timelines extending to approximately one year from the previous average of six to nine months. Despite this, the mid-market continues to see significant activity, offering viable opportunities for business owners looking to sell and capitalize on current market conditions.