Private equity firms expect an increase in the number of transactions in 2025, with 84% of respondents to the survey expecting at least 5 to 10 transactions in 2025, according to a published Deutsche Numis survey of private equity firms.

Last year, only 12% of private equity firms surveyed said they were “highly likely” to make large-scale acquisitions of portfolio companies.

Deutsche Numis surveyed 200 senior private equity professionals who said they expect a significant increase in interest in public-private sector transactions in the UK: 26% of respondents consider public assets as the main direction of development, compared with 14% in 2023.

According to the report, private equity firms also expect larger deals after a period of mostly short-term deals.

The optimistic outlook came after the intensification of transactions this year, as falling or stable interest rates made it easier to finance share buybacks.

“One of the main reasons for this growth is that the UK is a very attractive region for direct investment, where there are significant opportunities for the private and public sectors,” said Stuart Ord, co-head of mergers and acquisitions in the UK at Deutsche Numis.

According to LSEG data, M&A activity in the UK grew by 28.3% year-on-year, with the financial, industrial and consumer sectors leading the way.

“Private investors expect that there will be more mergers and acquisitions next year, which will be facilitated by the continued improvement in the financial markets,” said Alec Pratt, co-head of financial sponsors of mergers and acquisitions in the EMEA region at Deutsche Bank.

However, despite signs of weakening, the difficult debt financing situation remains a major obstacle for private equity firms. Two thirds of respondents to the survey described the UK debt market as difficult or “significantly difficult,” down slightly from 73% in 2023.

“We know that the banking market and the private lending market are open. However, even with reduced spreads and lower base rates, the cost of financing can make it difficult for sponsors to get the required financial return,” Ord said.

According to Deutsche Numis, potential changes in legislation have become the second most important problem for respondents to the survey, due to the fact that sponsors believe that antitrust authorities interfere in competition and markets.