After a subdued 2023 and a cautiously optimistic 2024, private equity activity in the UK mid-market has returned with notable energy. Deal volumes in the £50m–£250m range have picked up considerably, and at Mercier & Valez we have seen a marked increase in instructions from both sponsor-side and management teams navigating increasingly complex transaction structures.

But beneath the headline activity, a more nuanced picture is emerging — one that practitioners and their clients would be unwise to ignore.

Valuations Are Holding, But the Pressure Points Are Shifting

For much of the past eighteen months, the central concern for buyers was valuation gap — sellers anchored to pre-rate-rise multiples, buyers unwilling to bridge the difference. That gap has largely closed, but it has been replaced by a different set of friction points: warranty and indemnity insurance pricing remains elevated, earn-out structures are becoming more complex as parties seek to manage uncertainty, and representation and warranty claims are being scrutinised more carefully by insurers than at any point in the last decade.

We are advising clients to stress-test their earn-out mechanics earlier in the process than they might have previously. Disputes arising from poorly drafted earn-out provisions have become one of the most common sources of post-completion litigation we encounter, and the cost — both financial and relational — is almost always avoidable.

The Due Diligence Creep Problem

Another trend worth flagging is what we have started calling "due diligence creep" — the gradual expansion of scope in legal and financial DD that is quietly adding weeks to transaction timelines and, in some cases, causing deals to fall over entirely. Buyers are understandably cautious in the current environment, but there is a growing risk that exhaustive process is becoming a substitute for commercial judgement.

The most efficient transactions we have worked on in the past year have been those where both sides agreed early on a proportionate DD scope — and held to it.

ESG as a Deal Lever, Not Just a Checklist

Finally, ESG considerations are increasingly functioning as genuine deal levers rather than compliance formalities. We have seen acquirers walk away from otherwise attractive targets on the basis of supply chain exposure, governance concerns, or carbon liability uncertainty. Sellers who have invested in ESG infrastructure ahead of a process are achieving better outcomes — not just in terms of price, but in terms of the quality and speed of buyer engagement.

For management teams considering a sale in the next 12 to 24 months, early ESG preparation is no longer optional. It is deal hygiene.