News

Despite economic headwinds, strategic opportunities are emerging for well-prepared business owners.

The first eight months of 2025 have presented a complex but ultimately resilient landscape for mergers and acquisitions (M&A) in the UK, particularly within the small and medium-sized enterprise (SME) sector. While macroeconomic challenges persist, these very challenges have created a unique window of opportunity for astute business owners considering a sale.

At Frazer Hall, we have remained active, successfully guiding two sales in the sub £20 million range we work with, demonstrating that well-managed companies with strong fundamentals continue to attract serious interest and command strong valuations.

The state of the UK SME M&A market

Following a year of growth in 2024, which saw the highest UK deal activity since 2008 (BDO Private Company Price Index 2024 Q4: 3,127 deals), momentum has stalled. PwC reports a 9% decline in global M&A volume for the first half of 2025, a trend reflected in the UK mid-market, where KPMG indicates an 11.3% reduction in activity.
This shift is characterised by heightened buyer caution, driven by elevated financing costs and geopolitical uncertainty. The result is a more rigorous due diligence environment and increasingly nuanced deal structuring.

The climate has sharpened the focus of acquisitive parties. Strategic buyers, including private equity firms holding significant dry powder, are actively pursuing high-quality, resilient businesses to bolster their portfolios. There is targeted demand for well-run companies with stable cash flows, strong market positions, and robust customer loyalty—attributes that are invaluable in an uncertain economy.

Consequently, while average multiples for marginal businesses may have softened, premium valuations remain firmly accessible for top-tier companies.

Why economic difficulties can be a catalyst for sale

It may seem counterintuitive, but periods of economic uncertainty can be an optimal time for family-owned or founder-led businesses to consider a transaction. Here’s why:

1. Strategic acquirers are looking for a safe option: In a volatile market, larger corporations and private equity firms seek acquisitions to drive growth more predictably than organic investment can. A profitable, stable company represents a proven asset and a safe bet in rocky seas.
2. The competition is less fierce: The pool of speculative buyers—those who entered the market during boom times without a clear strategic rationale—has thinned. This means the remaining suitors are serious, well-funded, and highly motivated, leading to more straightforward negotiations.
3. Positioning for the next growth cycle: Selling during a period of uncertainty allows business owners to crystalise their value before potential future economic dips. It also allows a new owner with deeper resources to invest in the business during the downturn, positioning it for explosive growth when the economy recovers, a move that many smaller owners cannot fund alone.
4. Clarity on business resilience: Challenging times test a business’s mettle. A company that has maintained performance through the recent pressures demonstrates immense resilience, making it a highly attractive and derisked proposition for any acquirer.

A note from our team at Frazer Hall Corporate Finance

Our recent success in completing two transactions in the sub £20 million bracket underscores this reality. In both cases, the businesses were exemplary: they had strong customer bases, scalable operational models, clear growth narratives and had been able to maintain financial performance during difficult times. Despite the broader economic climate, we generated competitive tension between multiple serious parties, ultimately securing excellent outcomes for our clients.

The key to unlocking value in today’s market is meticulous preparation. Ensuring your financial records are impeccable, your commercial contracts are watertight, and your growth story is clearly articulated is more critical than ever.

Conclusion

The M&A market for UK SMEs in 2025 is open for business, but it favours the prepared. Economic difficulties have not stifled deal activity; they have simply refined it. For family-owned businesses that have navigated the recent challenges successfully, now may be the ideal moment to explore a sale and reap the rewards of the resilience you have built.

If you are considering the future of your business and would like to understand its potential in the current market, we invite you to speak with our team for a confidential, no-obligation consultation.

You can get in touch using our online form: Get In Touch

Find out more with our Plan4Sale Questionnaire (pdf)