technologyreseller.co.uk BUSINESS NEWS 05 Risk sharing between buyers and sellers is becoming a defining feature of the UK&I mid-market M&A landscape, claims Dealsuite, Europe’s leading platform for mid-market M&A transactions. Its latest bi-annual UK&I M&A Monitor shows a notable rise in the use of earn-outs and vendor loans in the first half of 2025. Alongside stable transaction volumes, this indicates a market that is adapting its deal structures to balance risk more evenly between both sides. In H1-2025, 39% of M&A advisors observed an increase in the use of earn-out arrangements, while 26% reported a rise in vendor loans. Both mechanisms are increasingly seen as tools to align interests, either by linking part of the transaction value to future performance or by enabling sellers to finance part of the acquisition. Warranties and indemnities remained widely applied, while 22% of advisors noted a modest uptick in asset/liability transactions. Resilience in the ‘New Normal’ Since 2020, dealmakers in the UK&I have navigated high inflation, rising interest rates, geopolitical tensions and global trade frictions. While uncertainty initially slowed M&A activity, the SME segment has adjusted, showing strong resilience. In H1-2025, 37% of advisors reported transaction volumes in line with H2‑2024, while 35% noted an increase. At the same time, buyer appetite has remained robust: in H1-2025, companies offered for sale attracted an average of 7.9 serious interested buyers, only slightly below the 8.1 recorded in H1-2024. This sustained level of demand underlines the continued attractiveness of SMEs and reinforces the view that the UK&I M&A market remains a seller’s market, despite financing headwinds and broader economic uncertainty. The Monitor also revealed a decline in average deal size. Transactions above £10 million fell to 25% of all deals, compared with 34% in late 2024. In contrast, deals below £2.5 million rose by 5 percentage points and those between £2.5 and £5 million increased by 6 points. This indicates a stronger concentration in smaller transactions across the region. Outlook: cautious optimism Looking ahead to the second half of 2025, sentiment remains positive, though financing conditions are expected to tighten slightly. While 29% of advisors anticipate financing will become somewhat more difficult and 9% foresee a significant challenge, a majority still expect activity levels to hold firm. Floyd Plettenberg, CEO of Dealsuite, said: “A decade ago, market turbulence often paralysed M&A activity. Today, many dealmakers have adapted to operating in an environment where uncertainty is constant. This resilience is particularly visible in the SME segment, where we continue to see healthy deal flow and an evolution in deal structures that share risk more evenly between buyer and seller. It is a sign of a more mature and strategic M&A market in the UK&I region.” www.dealsuite.com Rise in earn-outs and vendor loans balances risk more evenly between buyers and sellers M&A risk-sharing on the up UK a great place for tech growth New research from the Barclays Business Prosperity Index shows that the majority of UK‑based tech companies regard their home market as a more favourable destination for growth than other core international hubs. Research among 500 technology business leaders reveals that 62% consider the UK a more attractive location to grow and scale a tech business than mainland Europe, with 61% favouring the UK over the Asia-Pacific region and 60% preferring it to the United States. The UK’s strong market opportunities and customer base, access to a skilled and diverse talent pool and faster-growing consumer take-up of technology products were three key differentiators cited in the UK’s favour. Interest in the technology sector continues to surge, with half of tech businesses (50%) planning at least a 20% increase in AI investment over the next 12 months and 95% reporting growing demand from clients for AI products and services. This is supported by wider confidence in the economic outlook. More than three quarters (76%) of tech firms report that the UK macroeconomic climate is giving their business a boost and a similar share (75%) believe the political landscape will help support growth over the next three years. Investing in growth Tech firms are committed to ongoing investment in their business. Seven in 10 (70%) expect to commit more capital this year, with an average increase of 8.9%. Barclays’ anonymised client data comparing Q1 2024 and Q1 2025 also indicates strong investment intentions: Cash inflows into technology businesses rose by 1.7%, while overall cash balances in current accounts declined by 9.6%. The tech sector had the highest increase in savings account balances, up 21.5%, suggesting tech businesses are holding onto cash ready to deploy in support of their investment plans. Meanwhile overdraft usage fell by 26.2%, despite borrowing remaining relatively flat over the same timeframe. These figures reflect stronger short-term liquidity and a shift away from flexible, high-cost borrowing towards more structured financing, while also signalling greater confidence in cash flow stability and long-term planning. Despite plans for growth, some barriers to sourcing funding and investment remain. The most pressing are high costs associated with the fundraising process (40%), excessive regulatory requirements and compliance costs (36%) and limited government funding and grants (33%). home.barclays/businessprosperity
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