While UK deal activity has slumped to its lowest rate since 2017 in the third quarter of 2025, a top corporate lawyer explains ‘cautious optimism’ is what’s needed to improve the sector in the new year.
Speaking after the Office for National Statistics (ONS) released the latest data for mergers and acquisitions (M&A) involving UK companies, David Fitzmaurice, a Corporate Partner at Knights, said that while recent deal activity ‘has been discouraging’ now that the Autumn Budget is behind us investors ‘may perceive the market to be less volatile than in the lead up to the Budget’, and could sow the seeds for green shoots in early 2026.
The ONS figures for M&A activity between July and September showed the total number of completed domestic deals decreased to its lowest level since 2017. That’s despite the total value of domestic M&A during Q3 2025 totalling £5.3 billion, £1.9 billion higher than in Q2 and the third quarterly rise of 2025 so far.
Identifying that the increase in overall value of domestic M&A during Q3 has been heavily skewed by the £3.7bn acquisition of Direct Line by Aviva, David believes that although buyers have been hesitant, they may be looking to the new year to start deploying some of their capital.
David Fitzmaurice, Partner at Knights, said:
“Recently, we’ve been experiencing the lowest deal volumes since 2017, which has been discouraging. This reported increase in overall domestic deal value is actually misleading, skewed as it is by Aviva’s high value acquisition of Direct Line. Without this singular deal, the aggregate value of transactions is much lower than in Q2.
“However, we have been consistently told that plenty of capital is available to be deployed both from within the UK and elsewhere for the right asset. Low deal volumes suggest there is still plenty of ‘dry powder’ in the hands of would-be buyers.
“If the market perceives less fiscal volatility in the wake of the Autumn Budget, this can be what’s needed to improve market sentiment and allow momentum to build. But we need buyers to believe this in order to see this shift.
“As ever, assets being brought to market need to be in a good state of readiness to demand strong pricing from bidders. In addition to weaker pricing, our experience is that deals are taking longer and longer to complete, amplifying the slower volumes currently seen. In a tough market, doing the work to prepare is of paramount importance.
“I’m cautiously optimistic for an uptick in activity in early 2026.”