Mid-Market M&A Trends

1. Ongoing demand for high-quality assets

Buyers remain highly selective in the current market. Although capital is still available from private equity and strategic acquirers, it is increasingly focused on businesses with recurring revenues, clear growth prospects and strong governance. Companies that can evidence resilience across economic cycles, strong customer retention and a diversified customer base are especially attractive. Buyers are also looking closely at the quality and sustainability of earnings, rather than relying on headline growth alone.

For founders, this highlights the value of investing early in financial reporting, operational resilience and a capable management team. Increasingly, value is also being placed on proprietary technology, strong intellectual property protection, high-quality customer data and leading positions in specialist markets.

2. More disciplined deal processes

Mid-market dealmaking has become more measured, with transactions often taking longer to complete than in recent years. Buyers are undertaking deeper diligence, particularly on financial controls, customer concentration, compliance, cyber security, data protection and contractual risk. This reflects a broader focus on risk mitigation, as acquirers seek to identify potential issues before committing time and capital. We are also seeing more detailed negotiation of risk allocation, including warranty coverage, indemnities and earn-out or deferred consideration mechanisms. Warranty and indemnity insurance remains important in many mid-market transactions, although insurers are often conducting more detailed underwriting.

For sellers, early preparation can have a significant impact on both deal certainty and valuation. Businesses that undertake a vendor readiness exercise before launching a sale process are often better placed to identify and resolve issues that could otherwise delay or derail negotiations. Sellers should therefore review the business carefully, address any gaps or unresolved issues and deal with them before a formal process begins.

3. Increased use of earn-outs and deferred consideration

Earn-outs, rollover equity and deferred consideration are increasingly being used to bridge valuation gaps and manage uncertainty. These structures can help buyers and sellers align around future performance and enable transactions that might otherwise stall. In private equity-backed deals, management teams often reinvest part of their proceeds into the acquiring structure, giving founders the opportunity for a potential “second bite of the cherry” if the business grows and is sold again. However, these arrangements can add complexity and create post-completion tension. Earn-outs are most effective where performance metrics are clearly defined and both parties understand how the business will be run after completion. Entrepreneurs should therefore approach these structures carefully, ensuring that commercial objectives, decision-making authority and future exit plans remain aligned over the longer term.

4. Cross-border activity remains a key feature

Despite macroeconomic headwinds, cross-border M&A remains an important driver of mid-market activity. UK businesses continue to attract overseas investors, particularly in technology, business services, healthcare, energy transition and specialist manufacturing. The UK’s mature legal framework, skilled workforce and position as an international business hub remain key attractions for overseas acquirers.

Private equity funds from North America, Europe and the Middle East remain active in UK transactions, while UK founders are increasingly looking overseas for growth and exit opportunities. Cross-border deals can add complexity, including foreign direct investment regimes such as the National Security and Investment Act, antitrust reviews, tax structuring, employment law issues and cultural alignment. Early planning and specialist advice are therefore essential to helping these transactions proceed efficiently.

5. Artificial intelligence is becoming a key diligence focus

Artificial intelligence is now a key focus of transaction diligence. Buyers increasingly want to understand how a business uses AI, who owns and controls the underlying training data, whether appropriate governance frameworks are in place and what legal or regulatory risks may arise from AI-enabled products or services. They are also considering whether AI could disrupt or replace the company’s existing offering.

Conversely, companies that use AI effectively to improve productivity, enhance customer experience or develop differentiated products are likely to be viewed positively by investors and acquirers. Management teams should therefore ensure that AI adoption is supported by clear internal policies and robust contractual protections, particularly where third-party tools or sensitive data are involved.

6. Holistic planning is increasingly important

Founders are increasingly recognising the importance of aligning corporate strategy with personal objectives, including wealth preservation, succession planning and their future role in the business. Many are engaging advisers well before a transaction begins to assess their options and develop a longer-term plan. This may include reviewing ownership structures, implementing management incentive arrangements or undertaking tax and estate planning.

Looking ahead

Although economic and political uncertainty continues to shape market sentiment, businesses with strong financial discipline, capable management and clear strategic planning will be best placed to attract investment, pursue growth and maximise value when opportunities arise.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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