M&A Market Monitor 2025

Understanding deal trends and opportunities

M&A activity in the UK has experienced fluctuations over the past two years, influenced by economic, political, and global uncertainties.

Deal activity began to stabilise in the second half of 2024, and there was a surge in transactions completing ahead of the Autumn Budget, driven by anticipated capital gains tax increases. M&A transactions are picking up momentum, with growth in sectors such as Financial Services, Healthcare, Artificial Intelligence, Technology and Construction. Transactions in Future Energy and involving an Employee Ownership Trust model also remain robust and dynamic.

The TLT M&A Market Monitor contains detailed analysis of 59 transactions completed over the past two years by our Corporate team across England and Scotland, providing valuable data and insights into the current state and future direction of the UK M&A market.

Business leaders, investors and stakeholders can use this report to make informed decisions and capitalise on emerging opportunities.

Download the M&A Market Monitor 2025

Date published

13 February 2025

Sectors and market conditions

There is cautious optimism that the stabilisation of interest rates and inflation alongside greater political stability will boost M&A activity in the UK. Financial Services, AI, Technology and Healthcare are expected to continue to be popular sectors for buyers seeking growth opportunities.

Deal pricing

Pricing mechanisms have shifted, with an increased use of locked box methods, indicating a potentially improving market for sellers. Deferred consideration has seen reduced use, while retentions are utilised less frequently due to the burdens of formal escrow arrangements.

Earn-out arrangements

Increasingly used to bridge valuation gaps, with two thirds lasting two years or less. EBITDA remained the primary metric, although earn-outs based on specific products or service lines rose. Unspecified earn-out values and periods over five years also increased, reflecting longer-term integration plans and giving sellers longer to maximise potential returns.

Limiting a seller's liability

Warranty and indemnity (W&I) insurance remains important, offering sellers a clean exit and buyers broader protection. Buyers are carrying out extensive due diligence to ensure a comprehensive understanding of the target business and verify pricing, with a strong emphasis on regulatory and ESG matters. This is impacting deal timelines.

Regulatory clearances and approvals

Merger clearance controls and regulatory approvals are becoming more prevalent. Nearly half of Financial Services deals required regulatory approval, achieved within six months on average. This impacts completion timelines and often results in warranties being provided at exchange and completion, with termination rights for breaches, material adverse changes or tax covenant violations.

Restrictive covenants

Crucial in negotiations, they address competition, branding, and interactions with the target company’s employees, customers, and suppliers. Typically, they last two to three years after completion, but there has been an uptick in longer durations which corresponds with longer earn-outs. Ensuring they are proportionate and not anti-competitive is essential.