Mid-market private equity interest in the South East drops

South East Business; City Of London; On-site; GBP 100,000 - 125,000; Full time

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Mid-market private equity investment in the South East fell in the first half of this year, according to KPMG UK's mid-year private equity pulse.

The mid-year study into private equity deal activity found that interest in the region's mid-market declined, with 25 deals completing and deal volumes falling by 36% compared to H1 2024.

The findings reflect a backdrop of economic uncertainty, influenced by ongoing geopolitical developments and concerns surrounding the potential impact of trade tariffs.

Bolt-ons remained the largest component of mid-market private equity activity across the South East, making up more than half of all deals. Minority investments were the second largest deal type, followed by traditional and leveraged buyouts (LBOs).

The South East's mid-market private equity interest accounted for just under 7% of the total mid-market private equity backing in the UK. Deal activity in the mid-market slowed down across all regions in the UK, except the South West, which experienced increased activity in terms of deal volume, compared with the first half of 2024 (28 vs 22).

Sami Fairris, corporate finance managing director in Reading at KPMG UK, said: "While disappointing, the drop in South East private equity activity in the first six months of 2025 is not unexpected, especially when viewed in the context of the national picture."

"The uncertainty posed by international trade tariffs and the recent UK macroeconomic landscape has made its mark in the figures. But as conditions settle, there is a good chance that South East businesses will rebound and private equity will find the confidence needed to agree more investment."

"From a wider perspective, we have seen an acceleration in our book of live deals, led by a growing prominence of founders exploring transactions with UK and international trade acquirors, who have the ability to unlock deals with strategic synergies."

"We're looking forward to South East businesses regaining a stronger share of overall private equity deal activity that we know they have the track record and thriving private company ecosystem to deliver."

From a national perspective, last year's rebound in all private equity investment stalled in the first half of 2025 as activity dipped to the lowest levels since the second half of 2020.

Deal volumes dropped 17% year on year, with a total of 726 deals closed throughout the first half of 2025 compared to 876 over the same period in 2024.

The second quarter witnessed fewer deals compared to Q1 as geopolitical uncertainty put the brakes on activity across all private equity and the mid-market. Most deals took place in Q1 with 370, while Q2 saw only 356 deals close.

The slowdown in the mid-market was less pronounced with a total of 377 deals in the first half of the year, representing a fall of 11% year on year.

Alex Hartley, head of corporate finance at KPMG UK, said: "As we headed into 2025 off the back of strong deal numbers last year, the expectation was that M&A activity would continue to pick up."

"But economic uncertainty, driven by geopolitical events and nervousness around the impact of tariffs, has meant that the deals market has been slightly more volatile so far this year, and getting deals over the line is taking longer."

"That said, the mood remains cautiously optimistic, and there are still sectors where appetite remains strong, such as business services, healthcare and technology, media and telecoms."

"We may start to see activity pick up over the rest of the year, as business owners contemplate potential tax changes in the Autumn Budget and they have had time to assess any impact from global tariffs."