The UK's mergers and acquisitions landscape underwent a significant transformation in 2025, with a notable shift towards quality over quantity. While the total number of deals declined, the overall financial value of transactions experienced a substantial increase, reflecting changing investor priorities in a dynamic economic environment.
Deal Value Climbs as Volume Contracts
According to the latest industry trends data from professional services firm PwC, the total number of UK M&A deals fell by 12 per cent year on year to 2,991 transactions, down from 3,411 in 2024. This contraction in volume, however, was accompanied by a remarkable 12 per cent increase in overall deal value, which rose to £131 billion from £117 billion the previous year.
This unusual divergence between volume and value metrics highlights how investors have become increasingly selective in their acquisition strategies, focusing their capital on fewer, higher-quality assets while demonstrating a willingness to pay premium prices for particularly attractive opportunities.
Artificial Intelligence Drives Infrastructure Demand
The surge in deal value was particularly pronounced in digital and energy infrastructure sectors, where investors scrambled to acquire assets that would allow them to both keep pace with and benefit from the rapid scaling of artificial intelligence technologies. Demand for data centres, cloud platforms, and energy-intensive digital infrastructure underpinned some of the largest transactions throughout the year.
This sector-specific demand contributed to a significant 28 per cent increase in average deal size, which rose to £44 million from £34 million in 2024. The technology, media, and telecommunications sector alone recorded 590 transactions, reflecting the continued importance of digital transformation across the UK economy.
Financial Services and Energy Sectors Show Strength
The financial services industry delivered several of the UK's largest transactions in 2025, with deal values jumping 44 per cent year on year. Major insurance transactions alongside asset and wealth management deals contributed significantly to this sector's strong performance.
Meanwhile, the energy, utilities, and resources sector reported valuations climbing to £18 billion despite lower transaction volumes, as investors sought to tap into national energy transition initiatives and infrastructure growth opportunities. The government's increased support for the life sciences industry helped maintain stability in health sector transactions, which remained steady at 194 deals.
Market Conditions and Investor Confidence
Lucy Stapleton, head of deals at PwC UK, commented on the unusual market dynamics: "We would not usually expect deal values to rise so sharply when volumes are falling, which underlines how exceptional current market conditions are. After a difficult period for the UK deals market, 2025 marked a turning point."
The stabilisation of interest rates coupled with inflation moving back towards its target helped investor confidence gradually return throughout the year. This created what Stapleton described as "clear momentum" in the M&A pipeline, with particular activity coming from private credit providers and large global investment funds.
Capital Concentration Shapes Market Dynamics
The UK M&A market was increasingly shaped by the high concentration of capital held by large global private equity funds, alongside the rapid expansion of private credit as a financing channel. Private credit has become the fastest-growing financing option for large-cap transactions, capitalising on traditional banks pulling back from corporate lending while offering greater flexibility to borrowers.
Stapleton noted that outside the most structurally attractive sectors, activity has been more reflective of the UK's broader low-growth environment. "Buyers remain cautious, and assets require deeper preparation, clearer value-creation plans, and stronger proof of resilience before processes move forward," she explained.
Outlook for 2026
Looking ahead, PwC expects to see more deals crossing the finish line in 2026 as companies continue building their investment portfolios in response to opportunities opening up across a range of sectors. Consumer markets and industrials remained the most active sectors in terms of transaction volume in 2025, with 802 and 648 deals respectively, suggesting continued interest in these areas.
The evolving M&A landscape reflects broader economic trends, with investors increasingly prioritising strategic acquisitions that offer long-term value creation potential rather than pursuing volume-driven growth strategies. This quality-focused approach, combined with improving market conditions, suggests a potentially robust year ahead for UK merger and acquisition activity.
