After a very strong post-2020 bounce back, UK mid-market private equity encountered choppier waters in late 2022: geopolitical uncertainty, increased competition, and rising stakeholder expectations. This half-year review explains what happened in the first six months of 2023.

Our research, using PitchBook data, shows that in the first half of 2023 private equity-deal volumes in the UK mid-market were down 35% on H1 2022 and 51% down on H1 2021. While deal volumes have stagnated, record amounts of dry powder still exist in the Private Equity markets, creating a very competitive landscape for high-quality businesses.

The key point to understand about current deal activity is that this potential positivity is sector-specific. Technology, Media and Telecommunications (TMT), business service and healthcare remain the most active sectors, continuing to attract considerable Private Equity interest.  Other sectors, such as consumer markets and industrials have seen less activity, with supply chain, energy prices, and labour force issues being the main contributors.

There has also been a steady decline in secondary market transactions after a very active couple of years with many Private Equity funds now delaying bringing some of their businesses to market whilst waiting for conditions to improve.

Total UK PE buyout value and volume – excluding add-ons

graph depicting the total UK PE buyout value and volume – excluding add-ons

Source: PitchBook Data, Inc​

Despite the more challenging market conditions, with inflation still high and interest rates rising, there's a resilient market for high-quality assets run by ambitious management teams.

"SaaS businesses operating in favourable verticals continue to prove attractive to investors, both domestic and overseas, due to the annuity-like nature of their revenues, their scalability and resilience." Keely Woodley, Head of Corporate Finance Advisory

Including add-on acquisitions by PE firms’ portfolio companies, the decline was less pronounced with total deal volumes down 29% on H1 2022 and 39% on H1 2021.

Total UK PE buyout volumes – including add-ons

Graph depicting the total UK PE buyout volumes – including add-ons

Source: PitchBook Data, Inc​

One such transaction in the period was Palatine-backed IT services business FourNet, which acquired Nowcomm a leading cyber-security and network infrastructure specialist, in a strategic and value-enhancing add-on deal in April.

With inflation and the cost-of-living crisis denting many households’ spending abilities, around 80% of all PE investments (including portfolio add-ons) since 2021 have been into companies in the B2B products and services and IT industries.

Business services, technology, and healthcare were among the most resilient sub-sectors - B2B products and services performed comparatively well, with a 20% decline. Excluding add-ons deals, the B2B products and services industry was the best performer with H1 2023 volumes remaining broadly flat on 2022 (-3%).

Unsurprisingly, B2C deal volumes declined by 32%. Of the leading industries by deal volumes, consumer products and services deals fell 63% year-on-year, from 16 in H1 2022 to 6 in H1 2023 (compared to a decline of 32% across all deals), indicating the extent to which the cost-of-living crisis is bringing a high degree of caution to investors evaluation of consumer-facing businesses.

Total UK PE buyout volumes (top 10 industry sectors) – including add-ons

Graph depicting the total UK PE buyout volumes (top 10 industry sectors) – including add-ons

Source: PitchBook Data, Inc​

On the flip side, the commercial services sub-sector within business services, excluding add-ons, was the only sector to show any growth in H1 2023, with the number of deals up 6%.

Total UK PE buyout volumes – excluding add-ons

Graph depicting the total UK PE buyout volumes – excluding add-ons

Source: PitchBook Data, Inc​

“Against the current market backdrop, we've seen an increased investor focus on portfolio buy and build, including platform investments. There remains significant activity in the buy and build space, and this is a trend we see continuing for the remainder of 2023.” Mo Merali, Head of Deals and Business Consulting


“The low volume of private equity deals in H1 of 2023 doesn't give a full picture of the markets, advisers have been very busy working with management teams and business owners preparing and unlocking opportunities – Q2 this year for example has been very busy in terms of pitch activity and a higher volume of mandates are expected to launch by Q4 of 2023 and early part of Q1 of 2024. We have a strong pipeline, and we expect the market to pick up.” Humza Khan, Private Equity Coverage


“It’s a very polarised market -  If we are selling a good asset – a business performing well despite the headwinds we know are prevalent – there is strong demand. On the other hand, if it’s a business in trickier market conditions affected by macro environments, then it’s a very challenging process, from both a timescale and pricing standpoint."

“The second element of polarisation is in sectors. If you are dealing with a business in TMT, healthcare and some parts of business support services, then it’s really attractive and the market is still very strong. Conversely, for those sectors most affected by the cost of living crisis, namely consumer, then it’s incredibly tough.” Keely Woodley


“We’re seeing that polarisation has impacted sentiment too. Even quality businesses in what may be perceived not to be the ‘right’ sectors are now much more reticent in coming to market for fear of being tainted by a failed process." Mo Merali

Debt difficulties

The 18 months to June 2023 saw a number of different factors having a negative impact on lender appetite and terms. Growing concern at the end of 2021 as to the impact of inflationary pressures were dramatically increased following the invasion of Ukraine. This saw lenders significantly increase focus on a number of factors, but most critically margin sustainability. The impact of the 2022 mini-budget and the visceral response seen in interest rate assumptions then put the spotlight on debt serviceability with the result that lenders significantly reduced appetite and where terms were available, on average the quantum was lower and the margins (on top of SONIA which itself spiked) were higher.

The beginning of 2023 saw this market dynamic continue with lender deployment remaining low. However, from late Q1, with what was anticipated to be a moderation in inflation, lenders did begin to return to the market. This was not a return to previous debt terms, but that there were more lenders willing to deploy, albeit that information requirements were still held at the higher bar. The acknowledgement recently that inflation would remain higher for longer, and the anticipated consequential higher base rates, were certainly not welcome, but have not materially impacted this cautious return to the market by lenders.

“Whilst volumes in H1 2023 were down vs 2021, and terms were typically less borrower friendly, lenders are looking for ways to be supportive and leverage transactions in sponsored and non-sponsored deals are still getting done”. George Fieldhouse, Partner, Debt Advisory

Looking forward

ESG is an increasingly important consideration for PE and indeed across the wider deal-making landscape. This has moved from a 'nice to have' to more of a hygiene factor, ie, every business needs to be mindful of ESG before looking at transacting. Those which can demonstrate a compelling ESG angle will attract greater interest and valuation multiples.

With interest rates still climbing, some uncertainty is likely to continue affecting the broader deals landscape with certain sectors like automotive, manufacturing, property, and hospitality having a period of adjustment, and retail facing some fairly strong headwinds.

However, there will be a general election by January 2025 at the latest, which could positively impact deal volumes amid fears that whichever party wins will raise capital gains tax.

Therefore, we could see significant numbers of businesses which have not gone to market in the first half of this year, deciding they can wait no longer, and will begin a process late 2023 or early 2024.

“Business services sector will continue to be resilient and therefore very active throughout the remainder of the year. Additionally, any business with high recurring revenues, robust business models, strong margins, high customer retention, ambitious management teams and strong ESG credentials will be both sought-after and command a strong valuation.” Humza Khan

Case study: MAP to accelerate growth with Kester

In March 2023 we advised Cambridgeshire-based MAP Patient Access on its sale of a majority stake to Kester Capital, a lower mid-market investor specialising in the healthcare, information and data and technology sectors.

MAP is a leading provider of market access consulting services to the pharmaceutical and biotech sectors, with expertise in rare and orphan diseases and cell and gene therapies. MAP’s integrated approach blends best-in-class consulting with membership including its proprietary digital platform, MAP Online, which provides market access intelligence to its customers.

Founded by Christian and Dawn Hill in 2012, MAP has supported more than 70% of all highly specialised technology evaluations by the National Institute of Health and Care Excellence (NICE) to date and supported the development of 200+ new health technology assessments and pricing submissions.

Increasing pressure on healthcare budgets is driving higher levels of scrutiny from healthcare advisory bodies around the world and, with its deep domain expertise, MAP is well-positioned to help its customers navigate these challenges.

The founders sought a strategic investment partner to help deliver the next stage of the company’s growth.

Our team worked closely with the shareholders and the leadership team since 2020 to develop a transaction strategy.

Kester Capital’s life sciences credentials made it the ideal partner to support MAP’s growth aspiration. Our deal team project managed the transaction process, navigating a number of complex issues to deliver an excellent outcome for the shareholders.

Doug Bentley, Partner, corporate finance, commented “MAP is a high quality consultancy with deep expertise across orphan and ultra orphan diseases and cell & gene therapies. The strong cultural and strategic alignment with Kester will help the business to deliver its ambitious growth plans.”

The transaction with Kester will allow MAP to invest in broadening its service offering and expand into new territories. Kester and management will also target acquisitions to accelerate the growth of the MAP platform.

For more insight and guidance, get in touch with Mo Merali, Keely Woodley, or Humza Khan.