Why I Believe 2025 Will Be a Positive Year for Mergers and Acquisitions in the Business Sector

Andrew Feeke, Head of Corporate Finance at MHA, expressed his optimistic outlook for the M&A market in 2025. Despite the challenges faced in the past year, he sees a return to stability and a wealth of opportunities for dealmaking.

The beginning of 2024 saw a slow start in M&A activity due to higher interest rates, inflation, and geopolitical tensions, creating a cautious atmosphere. However, momentum gradually picked up throughout the year, reaching a peak before the autumn Budget as businesses accelerated transactions in anticipation of potential tax changes. Although the Budget caused some short-term uncertainty regarding business property relief and national insurance, the market quickly adjusted.

While external pressures like volatile geopolitics and unpredictable policies from the Trump administration in the US make investors cautious, the underlying fundamentals in the UK remain strong. Inflation is under control, growth is stable, and anticipated interest rate reductions are expected to boost business confidence. Both private equity and strategic trade buyers show a keen interest in transactions, with ample liquidity available in the market for businesses seeking investments or exits.

Risks in the current landscape cannot be ignored, given the prevalence of unexpected shocks like pandemics, wars, or political upheavals. However, business owners have adapted to dealing with uncertainties, reflected in the increasing use of deferred consideration structures to share risks between buyers and sellers. Pragmatism now shapes deal structures, ensuring that transactions proceed amidst caution.

Private equity firms hold significant unutilized capital, desiring quality businesses to invest in. Lenders are also actively backing opportunities, especially in the mid-market and lower mid-market segments. Despite occasional macro-level uncertainties, the overall outlook seems positive.

The UK Government’s efforts to create stability, especially in capital tax matters, contribute to a conducive environment for business planning. Feeke anticipates a solid year for UK M&A in 2025, with steady and sustainable growth, particularly in sectors where the UK excels. Potential sellers should find the current environment favorable for transactions.

While deal volumes might not reach the peak levels of 2024, driven partly by tax-related activities, Feeke remains positive about the future of M&A in the UK. He emphasizes the importance of adaptation and pragmatism in navigating uncertainties, ensuring that businesses continue to thrive in the evolving landscape. Feeke discusses these insights and more in The MHA Podcast – Trusted Insights, Strategic Advantage.