How strategic buyers are reshaping UK M&A

The headline numbers for UK M&A in the first half of the year tell two stories. Deal values in H1 were more than double those of the previous six months at USD237 billion, while volumes were down 22% versus H2 2025 at 1,303 transactions, mirroring the pattern in the U.S.. The trajectory across the half-year however was uneven: Q1’s total deal value (USD144.9bn) was the third-highest quarterly figure on record, but activity then dropped 36% to USD92.1bn between March and the end of June.

Activity among strategics drives deal pipeline

Strategic investors remain the primary drivers of activity, with M&A data showing a flight to quality: fewer deals, but conviction behind the pursuit of the best assets. The continued flow of U.S./UK public transactions can be seen in the combination of Unilever’s foods business with McCormick and Ingredion’s GBP2.7bn takeover of Tate & Lyle. Inbound M&A in H1 stood at USD202bn, more than double the previous six-month total and the highest half-year figure since H2 2021.

Asset prices are part of the story for foreign buyers targeting the UK market, alongside the perception of stability in the regulatory environment. The departure of Labour Prime Minister Sir Keir Starmer in June (the sixth such departure since Brexit) may test this impression, although his likely successor, former Manchester Mayor Andy Burnham, has been deliberate in his efforts to reassure markets by taking soundings on economic policy from a heavyweight group of former policymakers. 

Private equity activity is there, although not at scale; on the sponsor side we are seeing a heavy reliance on alternative structures (continuation vehicles and secondary buyouts in particular) as an exit route, with many funds needing to crystallize realizations before they can deploy meaningful new capital. 

The drop in activity in Q2 reflects the uncertainty that flowed from the war in Iran, compounded by uncertainty over inflation and how the Bank of England would respond on interest rates. Many UK businesses are cross-border by nature, exacerbating the impact of the conflict. Much as we saw in other markets, however, the primary effect on UK deal-making was to delay processes rather than stop them.

Focus on AI, infrastructure and energy transition deals

The other clear deal driver is AI, with corporates looking to jump-start their AI strategies by acquiring technology and skills. Here, the dislocation created by AI across industries is shaping target selection: businesses in sectors that are further along the AI curve are more attractive to acquirers looking to accelerate their transformation. While valuations are high, the calculus for most investors is that the upside still outweighs the risk. 

At the same time, AI- and data-related deals are being executed in an increasingly challenging geopolitical environment; the U.S. BIOSECURE Act, China's Network Data Security Management Regulations and the EU Tech Sovereignty Act, among other frameworks, have made data sovereignty and cross-border data transfer primary risk factors in deal processes. (We outline the key considerations for boards in AI-related deals as part of our Transformational forces series.  

Boards focus on carve-outs amid market dislocation

One of the more pronounced themes of H1 2026 has been the role of carve-out transactions in the deal pipeline. As in other markets across Europe in particular, bigger corporates are assessing whether they can create value through divestitures of non-core assets, which can be a drag on profitability and management time. 

The buyers for divested assets are, in the main, strategics rather than sponsors. Some are also finding their way to the public markets through spin-offs (e.g., Associated British Foods/Primark), which have performed well where the underlying business is sound. With that said, London IPO markets have remained quiet during H1—there had been hopes that green shoots in 2025 would flourish, but macro pressures have served to constrain new listings.