Quality over quantity: UK M&A in 2026

May 2026  |  FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2026 Issue

Against a backdrop of significant macroeconomic volatility, the UK appears to be experiencing a selective revival of transactional activity.

PwC, in its ‘Bigger bets, sharper choices: the new shape of UK M&A’ 2026 outlook, supports this conclusion and notes that deal activity across the UK market remains complex and unevenly distributed.

Despite a decline in overall volumes, the value of UK M&A transactions increased over the past 12 months as investors concentrated on fewer but higher quality assets. The total number of UK deals fell by 12 percent year on year to 2991, down from 3411 in 2024, which PwC attributes to subdued economic growth and a relative lack of confidence across the wider economy.

Over the same period, however, total UK deal values rose by 12 percent to £131bn, up from £117bn, and the average deal size increased by 28 percent. Major transactions were driven by opportunities emerging from advances in artificial intelligence (AI) and related technologies and infrastructure, as well as ongoing market disruption and consolidation in financial and professional services.

Rising deal values lifted average deal size across most sectors. The technology, media and telecommunications (TMT) sector recorded 590 transactions. The financial services industry saw several of the UK’s largest transactions, including major insurance and asset and wealth management deals, as sector valuations rose by 44 percent year on year.

“UK M&A in 2026 is defined by a flight to quality,” says Daniel Black, vice president of business development EMEA & LATAM at Ideals. “While 2025 saw a dip in deal volume, deal values increased in most global markets. UK dealmakers are balancing capital discipline with strategic urgency. Relatively high financing costs, valuation gaps and macro uncertainty are pushing buyers toward fewer, higher-conviction deals.”

Primary drivers

Stabilising interest rates and inflation moving back toward target levels are improving investor sentiment, particularly among private credit providers and large global funds. These developments are generating momentum in the UK M&A pipeline in several areas.

Digital and energy infrastructure continued to attract intense interest, as investors sought to capture the benefits of rapidly expanding AI technologies. Demand for data centres, cloud platforms and energy intensive digital infrastructure supported some of the

largest transactions last year, helping to lift average deal size by 28 percent to £44m from £34m.

Capital allocation trends are also shaping the UK market. Large global private equity (PE) funds now hold a significant concentration of available capital, while private credit has expanded rapidly. It has become the fastest growing financing channel for large-cap transactions, due to reduced bank lending and the ability of private credit to offer greater flexibility.

“The primary drivers for UK M&A are portfolio reshaping and the deployment of significant PE capital,” adds Mr Black. “US investors have also been active in acquiring UK assets that they see as being undervalued. AI is having a significant impact on dealmaking, both at a strategic and operational level.

“AI is driving investments in renewable energy, while also causing a reassessment of valuations in some sectors,” he continues. “At an operational level, our research shows that two-thirds of dealmakers use AI and automation, with increased speed and efficiency being the main benefits. This could filter through to quicker deal timelines during 2026.”

Potential constraints

As part of its commitment to supporting growth, investment and business confidence, the UK government announced proposals in early 2026 to refine the competition regime.

Investors have increasingly described UK merger control as unpredictable and procedurally burdensome when compared with European Union and US systems. The proposals aim to improve the UK competition framework and rebalance the process.

They seek to build on work undertaken by the Competition and Markets Authority over the past year to align with the government’s growth strategy, which calls for the CMA to be swift, predictable, independent and proportionate.

“The UK government is making the right noises about supporting deal activity,” suggests Mr Black. “However, the CMA did not block a single deal in 2025, so regulatory scrutiny should not be a major constraint on the market. Instead, I would expect economic and geopolitical uncertainty, particularly from the US, and the disruption caused by AI to be the main factors constraining deal activity.”

Clarity and resilience

According to PwC, the next phase of UK M&A will favour a clear strategic plan, AI enabled value creation, thorough preparation and strong evidence of operational resilience before transaction processes advance.

“We foresee a wave of transformational M&A as UK companies acquire scale to compete globally,” predicts Mr Black. “The TMT sector is leading this wave, specifically in cyber security and AI-driven software as a service.

“The energy transition is fuelling consolidation in renewables and infrastructure, while healthcare remains an always-on sector for pipeline expansion,” he continues. “Both the energy and biotech sectors have been particularly active so far in 2026, and we expect to see that continue.”

UK M&A activity in 2026 is steadily regaining momentum as investors pursue higher quality opportunities with renewed confidence. The year ahead is likely to reward businesses that demonstrate clarity, resilience and a disciplined approach to strategic growth.

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Fraser Tennant