Private equity snaps up £63bn of British business

Private equity deals in Britain went into overdrive last year with total activity in the UK hitting £63 billion as investors took advantage of low valuations to snap up some of the biggest companies in the country.

It was only 7 per cent shy of its record high in 2021, when deal activity hit £68 billion, according to data compiled by Dealogic.

The market research company tracked the number of deals that private equity firms had announced for British companies, including takeovers and minority stakes.

There were 305 deals during 2024, it found, compared with 229 in 2023. In the 2021 peak year there were 377 deals in the UK.

Private equity activity suffered from a prolonged period of higher interest rates over the course of 2022 and 2023, as the sector is heavily reliant on debt. Deals have surged back to life as financial conditions and confidence among buyers has improved.

Some of the big transactions last year included a £5.4 billion agreement for Hargreaves Lansdown, the FTSE 100 business, a £3.6 billion takeover of International Distribution Services, the owner of Royal Mail, and a £4.2 billion deal by Thoma Bravo, the technology private equity firm, to take over Darktrace, the cybersecurity company.

The flurry of deals by private equity firms has also contributed to the shrinkage of London’s universe of listed companies. The size of the market fell at the fastest pace in more than a decade in 2024, according to research from the investment bank Goldman Sachs.

Last year the Bank of England warned that businesses owned or backed by private equity were “more vulnerable to default than all other” large businesses. Research at the Bank showed that more than two million people were working for a business engaged with the sector and that these companies were liable for 15 per cent of all UK corporate debt.

There is continued interest from private investors in the UK this year. So far there have been 19 deals, according to Dealogic, worth a combined £2.9 billion.

It is the latest evidence that private equity firms are picking up undervalued companies in the UK. Both British and European stocks have long traded at wide discounts to their American counterparts, though the valuation gap has widened in the past few years as more investors have flocked to high-growth names in the US tech sector.