KPMG report

Private equity expected to pick up after slowdown

Graeme Williams of KPMG
Graeme Williams: foundations are in place

Private equity investment into Scotland’s mid-market businesses is expected to pick up as inflation falls and pressure eases on interest rates, according to an M&A specialist.

New data from KPMG shows activity has slowed during the first half of the year with 21 deals worth £2.26 billion in the period, 25% fewer than the first six months of last year.

It was in line with the UK which saw the number of deals fall to 609 from 909 in the first half of 2022.

Graeme Williams, head of corporate finance M&A for Scotland at KPMG UK, said: “As we stepped into 2023, many were hopeful that the market would stabilise.

“However, it quickly became clear that rising prices for goods and services, along with higher interest rates, and uncertainty about world events, continued to erode confidence and impact deal volumes.”

Despite the drop in volumes, he said there are reasons to feel positive about the UK’s M&A market with sgns of improvement starting to emerge on the economic front, including a fall in inflation.

“This could lead to a more favourable environment for interest rates,” said Mr Williams.“While the number of private equity exits has remained low in the first half of the year, there’s growing pressure in this area. It’s only a matter of time until there’s an increase in exits.

“Additionally, there’s a lot of available private equity funds that need to be invested in new opportunities sooner or later. Both factors could lead to a significant rise in mid-market private equity activity, given the right market conditions.

“The foundation for making deals is already in place. As greater economic, political, and financial stability returns, it won’t be too long before the M&A market becomes active again.” 

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