Private equity pause: Scotland suffers mid-market slump but ‘fundamentals remain solid’
“There’s no doubt that deal activity on the whole has slowed across the UK, and Scotland hasn’t been immune to that trend.”
Mid-market private equity investment in Scotland slumped in the first half of the year, new figures have revealed, but experts insist that the “fundamentals remain solid”.
KPMG’s mid-year study into private equity deal activity found that interest in the country’s mid-market declined, with 24 deals completing and deal volumes falling by 14 per cent compared to the first half of 2024.
The accountancy giant’s findings are said to reflect a “backdrop of economic uncertainty”, amid ongoing geopolitical developments and concerns surrounding the potential impact of US trade tariffs.
Bolt-on deal-making remained the largest component of mid-market private equity activity across Scotland, making up over two thirds of all deals. Traditional and leveraged buyouts (LBOs) were the second largest deal type, followed by minority investments and management buy-ins.
Scotland’s mid-market private equity interest accounted for 6 per cent of the total mid-market private equity backing in the UK. Deal activity in the mid-market slowed down across all parts of the UK, except the south west of England, which experienced increased activity in terms of deal volume, compared with the first half of 2024 (28 versus 22).
Graeme Williams, head of corporate finance in Scotland at KPMG UK, said: “There’s no doubt that deal activity on the whole has slowed across the UK, and Scotland hasn’t been immune to that trend.
“What stands out however is the consistency in the types of deals being done - bolt-ons made up over two-thirds of all mid-market activity here, showing that investors remain confident in backing growth through strategic acquisitions.
“While the wider market has been challenged by geopolitical headwinds, the fundamentals in Scotland remain solid,” he added. “We continue to see strong interest in key locations like Edinburgh and Glasgow, where high-quality businesses and resilient sectors are creating opportunities. As the market begins to stabilise, I’m optimistic that momentum will grow in the second half of the year.”
From a national UK perspective, last year’s rebound in all private equity investment stalled in the first half of 2025 as activity dipped to the lowest levels since the second half of 2020, according to the latest KPMG “pulse” report. Deal volumes dropped 17 per cent year on year, with a total of 726 deals closed throughout the first half of 2025, compared to 876 over the same period in 2024.
The second quarter witnessed fewer deals compared to the opening three months of the year as geopolitical uncertainty put the brakes on activity across all private equity and the mid-market.
Alex Hartley, head of corporate finance at KPMG UK, said: “As we headed into 2025 off the back of strong deal numbers last year, the expectation was that M&A [mergers and acquisitions] activity would continue to pick up. But economic uncertainty, driven by geopolitical events and nervousness around the impact of tariffs, has meant that the deals market has been slightly more volatile so far this year, and getting deals over the line is taking longer.
“That said, the mood remains cautiously optimistic, and there are still sectors where appetite remains strong, such as business services, healthcare and technology, media and telecoms.”
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