M&A deal activity hit by global uncertainty as processes delayed until H2

Global trade and economic uncertainty hit M&A deal activity in Q1 2025 with acquirers holding off on M&A and business owners waiting for a more optimal time to sell. However, a further potential reduction in interest rates combined with significant tax considerations for business owners should help to stimulate more deal activity, says leading audit, tax and consulting firm RSM UK. 

Today’s ONS quarterly M&A statistics show the total combined number of cross-border and domestic M&A transactions involving a change in majority share ownership fell to 395 in in Q1 2025, from 497 the previous quarter. On a monthly basis, there were 148 deals in January 2025, falling to 103 in February then jumping back up to 144 in March. The value of domestic M&A (UK companies acquiring other UK companies) was £2.9bn in Q1 2025, £3.5bn less than the previous quarter, and down on Q1 2024 (£3.2bn).

Inward (foreign companies acquiring UK companies) and outward (UK companies acquiring foreign companies) M&A values were at their highest since late 2022, driven by some notably large deals. The value of inward M&A reached £19.2bn in Q1 2025, a £15.2bn increase on the previous quarter, and £12.8bn more than Q1 2024. The total value of outward M&A in Q1 2025 was £9.4bn, £7.6bn higher than Q4 2024, and £4.7bn more than Q1 2024. 

James Wild, Partner and Head of M&A at RSM UK, said: “The sluggish economic climate, combined with trade uncertainty and NI tax changes are creating a drag on the UK deals market, which saw another subdued quarter of deal activity. There was a slight flurry of deal completions in March as business owners got ahead of the changes to business asset disposal relief in April, but it’s unlikely this will continue for the next two quarters. 

“Business owners have plans to sell on their radar, but they’re finding it difficult to perform in line with projections in the current environment, so are putting their sale plans on hold for now. Businesses want to see an improvement in markets, uncertainty to settle and interest rates to tick down further before they kickstart the deals process. The combination of these factors should help to stimulate more deal activity, likely to be towards the end of the year. In the meantime, businesses should use this time to prepare their business for sale and get ahead on tax planning such as considering inheritance tax and capital gains tax implications.

“There were various headwinds for business owners and investors to navigate in Q2 2025, including President Trump’s Liberation Day and rises in employment costs. We’re seeing specific industries that are particularly impacted by the uncertainty surrounding US tariffs, such as manufacturing, pause deals until they have more clarity on the trade situation. Businesses are also having to decide whether they absorb the additional employers’ NIC cost or whether it’s feasible to pass it onto consumers.

“There’s significant appetite from private equity to deploy funds, but they remain cautious to avoid buying unviable or risky businesses. But with sound opportunities out there, PE need to take on more risk to ensure fund deployment is in line with plans.”