Opportunities abound: key trends in the private equity market     

Jessica Ring examines what is driving private equity deal activity in the lower mid-market

It’s a more interesting time than most to be working in the private equity space. Factors ranging from the AI revolution and geopolitical instability to tariffs and, in some cases, extreme weather are prompting businesses on both the buy and sell side to pause for thought.

This has given us a unique insight into the key trends driving investment activity – and how they’re likely to evolve in the months ahead.

Mid-market maintains momentum

The good news is that despite this ongoing uncertainty, the UK’s lower mid-market has proven resilient, and continues to offer fertile ground for investors.

That’s because the deal flow drivers in this segment are slightly different, with the space comprising more founder entrepreneurs looking at personal succession planning, rather than seeking funding from classic institutional investors to deliver cyclical returns.

This makes the lower mid-market less sensitive to macroeconomic volatility and provides more opportunities for active investors and sellers. Crucially, we’re also seeing regional dealmaking thrive, as scale gives way to a more relationship-led approach supported by local expertise.

At the same time, the funding landscape is becoming increasingly competitive, with a broader mix of investors now active in the lower mid-market. Spin-out funds, family offices, independent sponsors and search funds are all targeting assets traditionally pursued by private equity, bringing new models and priorities to the table. Their presence is intensifying competition for deals—particularly at a regional level—where relationship-led approaches and flexibility around deal structure can be decisive.

Deal trends

As such, there is plenty of proverbial dry powder in the market, and growing pressure on funds to put it to work. However, investors are applying greater scrutiny on how they deploy this capital, as they seek to minimise risk and guarantee returns.

Valuations have become more disciplined—particularly in sectors like technology and marketing services, where multiples had previously been elevated by strong investor interest in innovations such as AI and automation. As these technologies become more embedded across industries, competition for funding is expected to intensify, prompting investors to be more selective in how they allocate capital.

As a result, investors are gravitating towards businesses in sectors less exposed to these innovations, such as facilities management and property services, which can offer predictable cash flows and low risk of tech disruption.

Of course, this isn’t to say that there aren’t opportunities available for innovative businesses operating in these fast-growth sectors. Business services, technology and industrials remain attractive sectors within the lower mid-market, comprising more than 60% of our deal activity last year. However, investors are now also focused on businesses that can demonstrate solid fundamentals, rather than chasing growth at all costs.

Bolt-on acquisitions also remain a key strategy – however, investors are tending to take a more strategic approach, using them to build scale and drive value creation in fragmented markets rather than purely as a buy and build play.

Painting a picture

This creates a favourable environment for well-prepared sellers who can clearly articulate their story and demonstrate their value. Investors aren’t just looking at numbers, but want to understand the business’ vision, and recognise how it fits into wider market trends. A compelling story can set a business apart in a crowded field.

As such, management teams should focus on building a credible, clear growth strategy supported by data and realistic assumptions.

Preparing early for due diligence will also be key, helping businesses to pre-empt any potential questions from investors alongside helping to identify and resolve any issues before going to market – ensuring a smoother process.

In this instance, engagement with a specialist advisor can often be an important first step towards preparing for a sale. At FRP Corporate Finance, we pride ourselves on offering a full suite of support for businesses looking to position themselves for investment – from devising a business plan and growth strategy to identifying and pitching to potential investors, all the way through to financial due diligence, valuations and ultimately managing the sale process.

I will act as a central point of contact for the private equity investor community, collaborating with financial sponsors to help unlock value across their portfolios.

It’s reassuring to see that private equity activity remains resilient despite recent economic turbulence. Looking ahead, with competition for deals high, having the right insight and relationships will be more important than ever.

For more information on how FRP Corporate Finance can support your business in the private equity space, contact jessica.ring@frpadvisory.com