As 2025 started there was a lot of talk and around the acceleration of deals, driven by the changes in Capital Gains Tax on entrepreneurs. We have seen stable deal volumes and the number of mid-market deals in the UK remained consistent with previous years, with around 180 deals completed across a variety of sectors.
When we look at the deal values, we have seen that the total value of these transactions was approximately £10.8 billion, slightly down from £11.4 billion in 2024.
The relative stability (and I emphasise relative) in the UK economic and political landscape, including the new Labour government’s policies, has contributed to a cautiously optimistic outlook for 2025.
There has been numerous notable Small to Mid-Market Deals, but some worth highlighting may be:
Tech Sector
The acquisition of Maestra by Arena Group involved the sale of Maestra, a leading event production company, to Arena Group. The acquisition aims to enhance Arena Group’s capabilities in delivering large-scale events.
Healthcare Sector
The sale of MedTech Innovations to HealthCo. MedTech Innovations, a mid-sized medical device manufacturer, was acquired by HealthCo. This acquisition is expected to drive the expansion of HealthCo’s product portfolio and market reach.
These deals echo our own activities where, for example, we have advised on a Food & Beverage Packaging businesses driving an MBO carve-out, to expand their game-changing sustainable packaging solutions into the global markets.
Macroeconomic Factors
It comes as no surprise that the M&A activity in the UK during Q1 2025 has been shaped by several macroeconomic factors:
Interest Rates
The stabilisation of interest rates has provided a more predictable environment for financing acquisitions. Lower borrowing costs have encouraged deal-making, particularly in the mid-market segment where access to affordable capital is crucial.
Inflation
A trend of lower inflation has increased buyer confidence, making it easier to agree on valuations and close deals. This stability has been particularly beneficial for SMEs, which often operate with tighter margins and where comparable are harder to rely upon.
Global Conflicts
The ongoing conflicts in the Middle East and Eastern Europe have been priced into the market, reducing their immediate impact on M&A activity. However, geopolitical risks remain a consideration for businesses planning international expansions.
We have in recent weeks however, had constant discussions with our clients and professional Partners with an overriding question:
What is the outlook going forward, considering the impact of recent US Tariffs on UK SMEs?
On April 2, 2025, the US announced a 10% tariff on all imports from the United Kingdom. This move has significant implications for UK SMEs, particularly those that export to the US:
Increased Costs
SMEs, which often operate with tighter margins, may struggle to absorb the additional costs imposed by the tariffs. This could lead to higher prices for consumers or reduced profitability for businesses.
Competitive Pressure
The tariffs may make UK products less competitive in the US market compared to those from countries not subject to similar tariffs. This could result in lost sales and market share for UK exporters.
Supply Chain Adjustments
SMEs might need to review and potentially restructure their supply chains to mitigate the impact of tariffs. This could involve sourcing materials from countries with more favourable trade terms or exploring alternative markets.
Diversification Strategies
To reduce reliance on the US market, UK SMEs might consider diversifying their export destinations. Regions like Asia and the Middle East present growing opportunities for UK exports.
Strategies for Mitigation
There are a few ways businesses can navigate these changes. For one, businesses could look to diversify their export markets by exploring alternative markets and thus reducing reliance on the US.
Another method to mitigate the risk is to enhance the value proposition. Investing in innovation and emphasising USPs can help you maintain a competitive edge despite increasing costs.
Then there’s the option to optimise your supply chains. This could require a restructure to source materials from other countries with more favourable trade terms but could mitigate risk.
Or you could take to activism, participating in industry associations and lobby for relief measures and supportive policies.
Conclusion
We believe the UK SME market is still an attractive landscape for M&A transactions to thrive. With all the uncertainties presented to Owner Managed Businesses, it remains vital to seek advice very early on when considering an exit. We still see smart money, be that Trade, PE or Family Offices, are seeking established businesses with strong systems and processes in place, and managed by passionate people; to add to their growing portfolios.
With this backdrop the team at M&A Chambers remain more bullish than ever on how we can support owners of small to mid-market SMEs to #OwnYourTomorrow!
M&A Chambers are a boutique M&A consultancy focusing on the SME, owner-managed business sector, equipped with over 75 years of experience.
We exist solely to collaboratively guide and advise entrepreneurs, and owner-managers on their business journey, be it to achieve their growth, sale or exit objectives, owning their tomorrow.
To have a discreet and confidential discussion about your plans, please contact Pieter van Rooyen: pieter.vanrooyen@ma-chambers.com and James Gosling: james.gosling@ma-chambers.com