RSM: Deal activity by private equity funds cooled down in first quarter

30 May 2025 Consultancy.uk

M&A activity by private equity funds in the UK cooled down in the first quarter of the year, in line with developments seen in other parts of the world, as investors more carefully assessed the environment, their portfolios and pipelines. That is according to analysis from RSM.

In the first quarter of this year, private equity buyouts in the UK market fell 36% from 453 in Q4 2024 to 291, and were down 18% compared to the same quarter last year (357). A similar trend was seen in the US with deals falling 18% from 1,740 in Q4 2024 to 1,435 in Q1 2025, and from 1,707 to 1,256 in Europe.

The decline in buyout activity was driven by the healthcare and life sciences industry, down 57% quarter on quarter, followed by financial services (down 46%) and technology and media (down 41%). The professional and business services sector, which includes consulting deals, fell by 29% quarter on quarter.

“After a strong Q4, it’s no surprise deal volume slightly tailed off in Q1, following a period of frontloading at the end of 2024 to get ahead of tax changes,” said Hywel Pegler, a partner at RSM.

Stuart Clowser, Head of Private Equity at RSM, added: “Deal activity has reduced significantly in Q1 2025, and the real question is when deal activity will bounce back.”

The analysis from RSM, which is based on PitchBook data, found that private equity funds are increasingly feeling the pressure to up their activity, both on the buy and sell side.

On the sell side, funds are sitting on large portfolios of investments with longer than historic hold periods, meaning that they are keen to exit, even if it means taking a hit on multiples. On the buy side, financial sponsors continue to sit on around £119 billion of ‘dry powder’ – cash sitting idle which they need to deploy.

Clowser: “In this challenging economic environment, private equity firms need to adapt and become comfortable in investing in businesses with some form of risk. This involves taking a calculated approach to acquisitions. To derisk such opportunities, firms are focusing on industries that they are specialists in and where they have a proven track record, so they are best placed to address and overcome any specifically identified risks.”

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