By Andres Gonzalez
LONDON (Reuters) -Private equity firms expect an increase in deal activity in 2025, with 84% of the respondents of a survey expecting to execute at least 5 to 10 deals in 2025, according to a Deutsche Numis survey among private equity firms published on Tuesday.
Last year, only 12% of the private equity firms surveyed said they were “highly likely” to execute bolt-on acquisitions to portfolio companies.
Deutsche Numis polled 200 senior private equity professionals, who said they expect a significantly increased interest in public-to-private deals in the UK, with 26% of respondents viewing public assets as the main pipeline focus, versus 14% in 2023.
Private equity firms also expect larger transactions, according to the report, after a period of primarily “housekeeping” bolt-on deals.
The bullish outlook comes after a pick-up in dealmaking this year, as falling or stable interest rates made financing easier for buyouts.
“One of the main reasons for the pick-up is that the UK is a highly attractive geography for private equity, with significant private and public opportunity sets,” said Stuart Ord, co-head of UK M&A at Deutsche Numis.
M&A activity in the UK has increased 28.3% year to date, with financials, industrials and consumer sectors leading the way, according to LSEG data.
“Private equity investors are expecting M&A to be busier next year, supported by ongoing improvements in financing markets,” said Alec Pratt, co-head of EMEA financial sponsors M&A at Deutsche Bank.
However, despite signs of easing, a challenging debt financing environment remains the main obstacle for private equity firms. Two-thirds of the survey’s respondents considered the UK debt market challenging or “significantly challenging”, a slight decrease from 73% in 2023.
“We know that the bank market and the private credit market are open. However, even with spreads tightening and base rates falling, the funding cost may make it difficult for sponsors to generate the required financial returns,” Ord said.
Potential regulatory changes have jumped to the second greatest challenge for the respondents of the survey, Deutsche Numis said, due to sponsors’ perceptions of an interventionist Competition and Markets Authority.
(Reporting by Andres Gonzalez, editing by David Evans and Jan Harvey)
