UK M&A: Where Are the Hotspots for Owner-Managed Businesses?

HURST Corporate Finance Partner Nigel Barratt discusses the current UK M&A market for owner-managed businesses, highlighting the sectors attracting the strongest buyer interest, what is driving valuations and the opportunities for business owners considering a sale. With buyers remaining active across a range of sectors, Nigel explores where the hotspots are and what owners need to consider when planning their exit.

UK M&A: Where Are the Hotspots for Owner-Managed Businesses?

With many business owner’s deferring decisions until last week’s budget I thought it would be useful to take stock of where the market now is for owner mangers considering a sale of their business.

In a typical week I receive two to three unsolicited approaches from potential buyers looking for opportunities. The approaches come from a wide range of potential buyers including; international companies and investors, UK companies, private equity funds (including newly established funds), family offices and high net worth individuals.

There are therefore, no shortage of buyers across all sectors of the economy. 

It is however obvious that the economic backdrop in the UK is challenging. The OBR’s recent forecast is for GDP growth of 1.2% in 2026 and 1.0% in 2027, before a gradual recovery. Market expectations underpinning its economic forecast imply interest rates rising to just over 4.25% by mid-2027.

With growth subdued and borrowing costs remaining elevated, buyers are prepared to place higher values on businesses operating in sectors offering growth, resilience and revenue certainty. I discuss these ‘hotspots’ below.

Professional services: the consolidation story continues

Independent financial advisers (IFAs) and accountancy practices remain among the clearest M&A hotspots. Private equity has helped transform both markets, funding consolidators that acquire smaller firms to build scale, widen geographical coverage and develop broader client offerings.

The appeal is clear: loyal client relationships, predictable fee income and fragmented markets with scope for further acquisitions. Competition for the best businesses continues to support very strong valuations.

Private equity investors are now looking for comparable opportunities elsewhere in professional services. Legal practices are an obvious candidate, particularly those with repeat work and scope to improve profitability through shared systems. Not every legal practice will fit the model, but the direction of travel is clear.

Technical services: recurring revenue and regulation

Another particularly active sector is facilities management (FM), testing, inspection, certification and property compliance services. Buyers are particularly targeting businesses providing fire and security systems, building compliance, mechanical and electrical maintenance, lifts, environmental testing and related specialist services. Companies serving social housing landlords are attracting interest as well as those serving industrial customers.

These sectors offer characteristics that private equity buyers, in particular, find compelling. Much of the work is essential rather than discretionary, inspections and maintenance recur and regulation, safety obligations or insurance requirements often underpin demand. These attributes provide valuable earnings visibility.

Businesses in these sectors are also considered to be resilient to disruption from artificial intelligence, a factor that has recently assumed significance amongst private equity investors. AI may improve scheduling, reporting and administration, but a building still needs physical inspection, a fire alarm still needs servicing and complex equipment still needs maintaining. 

Both trade buyers and private equity buyers are very active in the sector. Private equity-backed groups are looking to build national platforms through acquisitions. Competition between potential buyers  can translate into attractive valuations for well-run businesses, especially those with good levels of recurring revenue and strong customer retention.

The infrastructure revolution: decarbonisation and AI

A further driver of M&A is the enormous investment required to modernise the UK’s infrastructure. Decarbonisation demands upgrades to electricity networks, renewable generation, energy storage and the efficiency of buildings and industrial facilities. Social housing landlords are also under pressure to help their tenants reduce energy costs through decarbonisation initiatives such as solar panel and heat pump installations.

At the same time, rapid growth in AI is increasing demand for data centres, with substantial implications for electricity supply, grid connections, cooling and power resilience. Energy transition and digital infrastructure are converging to create opportunities for specialist engineering businesses.

Companies involved in electrical infrastructure, grid connections, power systems, specialist installation, cooling, controls, testing and maintenance are attracting growing interest. Buyers particularly value scarce technical expertise, strong project pipelines and continuing maintenance revenues. As always, a business with repeat income and reliable margins will generally command more attention than one dependent on a handful of large projects.

Tax Issues

It’s never a good idea to determine an exit strategy around tax issues but business owners need to understand their after tax return from a sale.

The recent Budget resulted in further changes to Business Asset Disposal Relief (BADR). BADR reduces the rate of Capital Gains Tax to 18% (from the main rate of 24%) on the first £1 million of gain. The relief will be reduced to £0.5 million with effect from 6 April 2027. 

The Budget also unveiled a new Founders’ Relief, offering a 10% capital gains tax rate on up to £10 million of qualifying lifetime gains from April 2027. However, the government estimates only around 600 individuals a year will qualify due to the relief’s strict criteria.

My advice to vendors is to plan around a 24% charge to Capital Gains Tax. If you are currently in discussions around a sale, completing prior to 5 April next year makes sense. 

What does all this mean for potential sellers?

We continue to be confident of selling a good quality, profitable business in any sector.

For business owners in the sectors I mention above there is a real opportunity to attract strong interest and attractive valuations.

Sector interest does not mean every business will attract a premium valuation. Buyers distinguish between businesses with recurring revenues, capable management teams and well-diversified customers, and those heavily reliant on their founders or vulnerable to contract losses. These themes are of course relevant to every business!

If you want to discuss the sale of your business please call Nigel Barratt on 0161 4772474 or email imagine@hurst.co.uk