Total private equity investment activity in the UK rose by 4.4% in 2024, with deal values increasing to their highest level for two years, according to the latest UK Private Equity Review from KPMG UK.

This increase was as a result of a more stable economic climate, with interest rates and inflation falling; greater political certainty following elections in the UK, and a surge in transactions ahead of anticipated changes to Capital Gains Tax.

The comprehensive annual study into private equity deal activity has revealed that 1,699 transactions, with a total value of £158.9 billion were completed during 2024, which represents an almost 12% increase in deal values from 2023. The majority of deal activity took place in the second half of the year, with values increasing to their highest level since the first half of 2022.

Commenting on the findings, Alex Hartley, Head of Corporate Finance at KPMG UK, said:

“There are encouraging signs from the 2024 data that deal activity may have bottomed out in the UK in 2023, as we saw activity, both in volume and value, pick up last year. In particular, we saw significant activity in the second half of the year as many business owners tried to get ahead of expected changes to Capital Gains Tax."

“Given the current signals in the market around increased activity levels – alongside reducing inflation and interest rates and greater political certainty – there is cautious optimism that UK private equity deal activity will see further growth through 2025 and 2026.”

UK mid-market activity:

Mid-market private equity deal volumes rose to their highest level in more than three years in the second half of 2024, across the year volumes were up 15.5% on the year previous.

However, while volumes were up, overall deal value was down 9.1% to £44 billion. This is due to a combination of smaller deal sizes, with privately owned businesses pushing through deals ahead of the Autumn Budget and a rumoured increase in Capital Gains Tax, and an increase in bolt-on investments - 2024 saw a 17.5% increase, year-on-year, in the volume of bolt-on investments across the UK mid-market.

Jonathan Read, Head of Mid-Market Private Equity at KPMG UK, commented:

“While improving market conditions and political stability were important factors in building confidence in the deal market through 2024, anticipation of potential changes to Capital Gains Tax rates in October’s Budget led many entrepreneurs to de-risk at the end of 2024. This led to a surge in deals, particularly in the mid-market where we saw privately owned business looking to realise their assets ahead of any proposed changes."

“We expect this theme to continue as the future outlook of Capital Gains Tax in the UK comes back into focus as we approach this year’s Budget.”

Sector Insight - TMT saw greatest growth, while others punched above their weight:

Business services dominated the private equity deal market, representing 43% of the total deals made in 2024, up more than 10% over the previous year. However, it was TMT which emerged as the hottest sector. Deal volumes were up nearly 19% year-on-year and cumulative values were up nearly 58% over the same period, capturing more than £40 billion in total deal value.

While deal volumes were both down in Financial Services and the Energy sector, the value of those deals was greater than their sum. Financial services represented 11% of the deals, but 14.6% of the value, while energy represented 3% of the deals, but 4.7% of the overall value, indicating that they were both punching above their weight.

Another sector that saw a resurgence was Consumer Goods and Retail, with volumes up 5.3% to 138 and values up 21% to £10.7 billion, reflecting improving consumer confidence through the year.

Naveen Sharma, UK Head of Private Equity at KPMG UK added:

“While business services will remain the largest part of the UK market, we expect to see continued growth in the TMT sector as companies drive their digitisation efforts. The energy sector may also become particularly interesting to private equity funds as the UK ramps up investment into renewables.”

2025 outlook for private equity:

Alex Hartley, Head of Corporate Finance at KPMG UK, concludes:

“We anticipate deal activity to continue to pick up through 2025 and 2026. Platform and buy-and-build deals will likely continue to dominate the deals markets as private equity investors seek to drive growth through strategic bolt-ons, particularly in the Business Services and TMT sectors."

“At the same time, we expect to see increased activity in the energy sector as investors focus on increased government investment and the continued emphasis on the energy transition.”