Private equity (PE) deal activity dropped off in Q1 2025, as businesses frontloaded deals ahead of Autumn Budget tax changes and as global economic uncertainty took hold, according to analysis of PitchBook data* by leading audit, tax and consulting firm RSM UK.

UK PE buyouts fell 36% from 453 in Q4 2024 to 291 in Q1 2025 and were down 18% compared to the same quarter last year (357). A similar trend was seen in the US with deals falling 18% from 1,740 in Q4 2024 to 1,435 in Q1 2025, and from 1,707 to 1,256 in Europe.

The decline in buyout activity was driven by the healthcare and life sciences industry, down 57% quarter on quarter, followed by financial services (down 46%) and technology and media (down 41%).

UK corporate M&A deals decreased 34% from 809 in Q4 2024 to 532 in Q1 2025, while venture capital deals were down 13% from 462 to 401 in the same period.

Salik Chaturbhai, Private Equity Analyst and Financial Modelling Lead for PE at RSM UK, said: “Many private equity deals were frontloaded in Q3 and Q4 of 2024 as investors wanted to get ahead of any potential tax changes. We’re now seeing a rebalancing of deal activity to more normal levels, combined with global economic uncertainty causing some investors to put deals on hold. With geopolitical uncertainty ramping up even further in April following the announcement of US tariffs, and Q2 shaping up to be equally as quiet, much of the year’s volume growth will hinge on a more active H2.”

Currently, UK PE dry powder is sitting at £119bn**, which has fallen from £145bn in 2023, but remains higher than the £101bn in 2021.

Salik added: “PE firms continue to sit on around £119bn of dry powder which they need to deploy, but many are taking a cautious approach to avoid buying unviable or more risky businesses. However, there are sound investment opportunities out there, which are being priced at high multiples due to strong competition.”

Stuart Clowser, Head of Private Equity at RSM UK, said: “Deal activity has reduced significantly in Q1 2025, and the real question is when deal activity will bounce back. PE funds are sitting on large portfolios of investments with longer than historic hold periods, limited partners are seeking liquidity and funds are reaching the end of their 10-year closed ended lifecycle. These factors are contributing to the pressure to crystallise realisation of investments.

“In this challenging global economic environment, PE firms need to adapt and become comfortable in investing in businesses with some form of risk. This involves taking a calculated approach to acquisitions. To derisk such opportunities, PE firms are focusing on industries that they are specialists in and where they have a proven track record, so they are best placed to address and overcome any specifically identified risks.”

* PitchBook Data Inc., RSM UK – as of 31 March 2025

** PitchBook Data Inc., RSM UK – as of 30 September 2024