Finding Clarity in a Volatile Market
For all the noise about economic headwinds and boardroom caution, the UK’s mergers and acquisitions scene, [time of writing is October 2025], is quietly adapting. Volatility is no longer a shock – it’s the baseline. In this new reality, smart buyers and sellers are learning how to close deals in a market where money is costlier, risk is shared more creatively, and technology is reshaping how transactions get done.
A Market That Refuses to Stall
The UK mid-market – deals typically involving companies with £1–£170 million turnover, has faced a pincer movement of challenges since 2020: stubborn inflation, higher base rates, fraught geopolitics, and protectionist trade currents. Yet rather than grinding to a halt, dealmaking has recalibrated.
Data from Dealsuite’s European M&A Monitor (Sept 2025) shows that while the UK & Ireland saw a modest slowdown in transaction volume in the first half of 2025 compared with late 2024, the market is far from moribund. Roughly 46% of European advisors reported stable deal flow, and 34% saw an increase – though the UK lagged behind more buoyant regions such as the Nordics and Southern Europe.
Other public datasets reinforce this picture. ONS statistics indicate that inbound UK deals have dipped slightly from 2024 highs, but domestic transactions remain steady. Meanwhile, platforms like IMA Institute and Dealsuite’s UK&I Monitor show continued appetite in the lower-mid market – a space traditionally resilient to macro shocks because buyers often prize succession opportunities and niche capabilities over pure growth bets.
Sectors in Focus
Technology Still the Star, Industry & Manufacturing Ascendent
If there’s one headline from 2025’s deal flow, it’s that technology remains irresistible. Across Europe, Software Development ranks as the top sector for expected deal growth into H2 2025, joined by Industrial & Manufacturing and Business Services. UK advisors echo this: even with slightly softer volumes, software and IT services consistently attract the highest buyer interest – around 11 x interested parties per target on average, compared with just 4–5 x in many other segments.
Healthcare & pharmaceuticals also continue to command attention, benefiting from long-term demographic demand and government spending. By contrast, retail and hospitality are challenged by cost inflation, labour shortages and rising borrowing costs.
Valuations
A Gentle Compression but Strong Premiums for Quality
On the pricing front, the headline number matters: the average European mid-market EBITDA multiple sits at 5.3, with the UK & Ireland slightly above this but slipping to 5.35 in H1 2025.
Premium sectors still command healthy numbers:
- Software Development: UK & Ireland at 8.2x EBITDA (DACH tops at 8.9x)
- Healthcare & Pharmaceuticals: UK around 7.6x
- IT Services: ~7.6x
Conversely, consumer-facing and cyclical sectors trade on thin margins – retail as low as 3.4x.
A defining feature of 2025 is the “size premium”. Smaller companies (EBITDA ~£170k–£400k) struggle to fetch more than 3–4x, while those at £8–10m EBITDA reach 8.5x – a gap of more than 5 turns in the UK market.
Financing
Not Free, Not Frozen
One of the biggest storylines is the cost and availability of debt. Post-rate hikes, UK financing conditions are described by advisors as stable but not easy. Only 20% of European respondents reported better credit conditions in H1 2025, while 26% saw tightening.
Private credit funds have partially filled the gap left by more selective banks, but pricing remains 150–250 bps higher than in 2021. For mid-market acquirers, leverage is still possible – but structuring is more complex and lender diligence tougher.
Earn-outs and risk-sharing deal terms are the direct response. 42% of advisors across Europe report rising use of earn-outs, with UK lawyers also citing longer warranty periods and more extensive indemnities.
Technology and AI
Quietly Reshaping the Process
A subtle revolution is underway behind the scenes. Two years ago, just 7% of European advisors used AI routinely. By mid-2025, 37% now use AI regularly and 44% occasionally.
The UK’s mid-market dealmakers report the most tangible benefits of AI being market research, target evaluation and uncovering off-market opportunities – a potential boon for buyers seeking proprietary deals in crowded sectors. Legal drafting is also accelerating, though due diligence remains more human-intensive.
Sentiment
Cautious but Tilting Positive
Perhaps the most telling metric is sentiment. Dealsuite’s survey shows 71% of advisors in Europe – including the UK – expect an improving or at least stable second half of 2025, despite economic unease.
Sellers appear to be recalibrating price expectations, while buyers – flush with dry powder from private equity and corporate balance sheets – are keen not to miss strategic plays.
Legal and advisory firms such as PwC UK and White & Case also predict a slow but steady rebound: distressed M&A (particularly in consumer sectors) will mingle with strategic technology acquisitions and PE roll-ups in fragmented markets.
TheNonExec Perspective
At TheNonExec, we see these market signals translating directly into boardroom conversations. Business owners are asking: “Should we sell now, or wait for multiples to bounce?” Our counsel is pragmatic:
- Quality still commands a premium – but buyers will scrutinise cash conversion, customer concentration and leadership bench strength more than ever.
- Preparation is no longer optional – rigorous vendor due diligence, well-evidenced forecasts and thoughtful deal structuring (including earn-outs) can mean the difference between a stalled process and a premium exit.
- Technology is levelling the playing field – AI-driven research and digital deal platforms mean that even mid-sized firms can now run highly competitive sale processes.
For founders and shareholders looking to exit in the next 18–36 months, this is not a market to fear – it’s one to navigate intelligently. Valuations remain attractive for well-run businesses and capital is still ready to deploy for the right opportunities. But preparation, positioning and negotiation strength are more important than ever.
Bottom Line
The UK’s M&A market in late 2025 is neither booming nor bust – it’s evolving. Volatility hasn’t killed dealmaking; it has professionalised it. Buyers are abundant but disciplined, financing is available for the prepared and technology is quietly reshaping how transactions are sourced and closed.
For owners considering a sale, TheNonExec’s experience in structuring and running competitive mid-market processes, especially in uncertain climates, can help unlock premium outcomes when markets are nuanced and buyers are choosier. Contact us now to find out how we could support your company sale.
Tags: 2025, AI, Dealsuite, manufacturing, Market, OCT-25, October, Technology, Volatile
