While the direction of the UK economy remains uncertain, dealmaking is flourishing as the country races ahead of its European peers in the M&A market
The UK economy currently stands at a crossroads. Critics of the new Labour government, elected last July, warn that tax increases will hold back growth. There are also concerns that inflation has remained “sticky”—the annual rate stood at 3.4 percent in May, a fractional drop on the previous month, but up from 2.6 percent in March.
This will limit the ability of the Bank of England’s Monetary Policy Committee (MPC) to support the economy with interest rate cuts in the short term—indeed, the base rate was held at 4.25 percent in June. Meanwhile, after growing by 0.7 percent in the first quarter of the year, the UK economy contracted by 0.3 percent in April.
Despite these headwinds, M&A activity has been buoyant throughout Q2. The Bank of England also seems to consider recent inflationary pressures to be temporary, with the MPC indicating that there is potential for further cuts later in 2025, albeit with a “gradual and careful” approach.
M&A activity: Top targets by value 2024 – 2024
Target location: Western Europe Bidder location: Global Sectors: All Sectors
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Effective July 1, 2023, the underlying Mergermarket data supporting the M&A Explorer was consolidated with Dealogic data to produce an even more complete picture of the M&A marketplace. M&A Explorer commentary published before July 1, 2023 may reference data that does not reflect this consolidation.
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The international context has added to the uncertainty, particularly as the US administration continues to pursue its trade tariff policies. While the UK has signed a free-trade agreement with the US, reducing its exposure to tariffs, the OECD now expects UK economic growth to be slower than previously expected this year and next. Its most recent forecast, unveiled in June, is for growth of 1.3 percent and 1 percent in 2025 and 2026, respectively, down from its previous prediction of 1.4 percent and 1.2 percent.
Delivering on deals
While the economic backdrop remains volatile, M&A activity in the UK has proved incredibly robust. The UK saw 3,486 deals worth US$248.6 billion in 2024, up 28 percent and 71 percent on the previous year in volume and value terms, respectively. These figures propelled the UK to the top of the M&A charts across Western Europe in 2024.
Indeed, by volume, the UK was the world’s second-busiest M&A market last year, with only the US seeing more deals. Value wise, the UK came third, behind the US and China.
The UK’s biggest deal last year saw International Paper agree an US$18.5 billion combination with DS Smith. The US business outbid competitors for the UK company as consolidation in the international paper and packaging industry accelerated.
PE powerplay
Private equity activity (incorporating buyouts, exits and secondaries) in the UK M&A market was also notably stronger, with 911 deals worth US$111 billion in 2024, up from 768 deals worth US$63.5 billion in 2023.
A surge in take-private transactions, with PE bidders attracted to relatively low valuations on UK public markets, was one major driver of the strength of overall UK M&A last year.
PE bidders accounted for five of the ten largest UK M&A transactions last year, including two of the top three. At the top of that list, NB Private Equity Partners bought into education group Nord Anglia, investing alongside existing backers including EQT and the Canada Pension Plan Investment Board. The deal valued Nord Anglia at around US$14.5 billion, in an education sector where the number of children in private schools globally continues to rise sharply.
A slower Q1 but a summer deal bonanza
In spite of a more volatile global dealmaking environment, the UK’s M&A momentum has continued into 2025. After a slight lull in announced deals in the first quarter, Q2 has seen a significant pick-up.
There were 594 deals worth US$38.9 billion in the UK during the first quarter of 2025. As of June 17, though, the second quarter has witnessed a further 668 deals worth a total value of US$45.3 billion—a quarter-on-quarter rise of 12.5 percent and 16.5 percent, respectively.
Meanwhile, completed deals this year have seen a surge in value. Between January and the middle of June, there were 1,207 completed transactions worth a total of US$118.6 billion—a year-on-year value increase of 52 percent.
The largest deal of the of the year so far came in February, with the US$6.3 billion merger of Italian engineering and drilling business Saipem with the UK’s Subsea7. The deal was predicated on the opportunity to build a leading global player in offshore energy and is part of a broader trend toward consolidation in the oil service sector.
Moving into the second quarter, there were a slew of megadeals announced across a variety of sectors, including technology, media and telecommunications (TMT), industrials and chemicals, and financial services. The most widely publicized deal saw US food delivery giant DoorDash bid £2.9 billion (US$3.9 billion) for UK rival Deliveroo.
Meanwhile, on a banner day for UK M&A, no fewer than four US$1 billion-plus deals were announced on June 9. These included the second-largest transaction of the year so far, PE firm Advent’s proposed buyout of Spectris, the listed manufacturer of precision measurement instrumentation and controls, for US$6 billion, and US chipmaker Qualcomm’s US$2.4 billion acquisition of semiconductor company Alphawave.
More deals on the horizon
Given the early summer surge, dealmakers are optimistic about further M&A activity in the UK for the remainder of 2025. The economic backdrop, though not without challenges, remains supportive, with the UK outperforming its G7 rivals in recent months.
Meanwhile, the UK remains a standout destination for dealmakers, as highlighted in February by the M&A Research Centre at Bayes Business School, whose annual M&A Attractiveness Index saw the country rise to fifth place globally.
Falling interest rates will also support access to finance, both for domestic bidders and international acquirers of UK companies, in particular US bidders, who see the UK as something of a safe haven. And the UK government’s determination to pursue a growth agenda has seen the Competition and Markets Authority, the UK’s antitrust regulator, hint at a more liberal approach to how it scrutinizes deals.
Meanwhile, improved borrowing conditions are likely to spur PE bidders into further action, particularly as firms sit on a collective US$1.2 trillion in dry powder, which needs to be deployed to satisfy LPs.
More broadly, the fact that the UK is one of relatively few countries worldwide to have agreed a free trade deal with the US administration—limiting tariffs on most UK exports to the US—provides confidence. Shares in UK companies also continue to trade at discounts to their international counterparts, particularly in the US, creating potential for further take-private activity.
Present challenges but a bright future
This does not mean there are no headwinds. Inevitably, UK M&A may be adversely impacted by a slower global market, with dealmakers still in wait-and-see mode as the US continues to vary its approach to tariffs. Other geopolitical pressures, notably Middle Eastern conflict and Russia’s war with Ukraine, may increase uncertainty and give dealmakers pause for thought.
Nevertheless, there is good reason to be optimistic for sustained increases in M&A deal flow, particularly in sectors including TMT, financial services and business services, which continue to be hotspots for UK M&A activity. With both PE and corporate buyers tracking UK targets, many M&A advisers are understandably upbeat for the remainder of this year and beyond.
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