Professional and business services firms resilient despite dip in private equity deals

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%). However, professional and business services fell less sharply quarter on quarter (down 29%).

Hywel Pegler, Head of Professional and Business Services at RSM UK, said: “After a strong Q4, it’s no surprise deal volume slightly tailed off in Q1, following a period of frontloading at the end of 2024 to get ahead of tax changes. While 2025 appears to have started on the backfoot, it’s likely we’ll see a rebalancing of deal activity to more normal levels throughout the year. More encouragingly, professional and business services firms continue to demonstrate resilience, with a markedly smaller decline (29%). It seems the industry is standing firm and demonstrating its continued attractiveness for investment.

“Professional and business services is one of the UK’s key drivers of growth and productivity, as outlined in the government’s Industrial Strategy, contributing millions to the UK’s economic output and employing 2.4m workers. 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, accountancy remains a hotbed for deals, with 17 of the UK’s top 30 firms backed by PE as of this year, making it an attractive subsector for potential investment.

“We are now seeing this translate into the legal sector middle market as well, with a number of recent completed deals. In addition, although primary PE deals only accounted for 22% of PE transactions in the recruitment sector in Q1, investors continue to seek bolt-on acquisitions to diversify, enhance organic growth, and realise returns within their typical 3-5-year exit horizons – a trend that underscores the cyclical nature of the PE investment cycle.”

He added: “With rising geopolitical uncertainty following the announcement of US tariffs, it’s crucial the government’s Industrial Strategy provides a clear framework for long-term growth. By prioritising its growth-driving industries and equipping them with the clarity and confidence to invest, the strategy can stimulate deal-making, bolster buyout activity, and encourage investors to commit capital.”

* PitchBook Data Inc., RSM UK – as of 31 March 2025
** PitchBook Data Inc., RSM UK – as of 30 September 2024