The UK lower mid-market: bigger isn’t always better

The UK private equity market has faced a difficult 18 months, with British managers feeling the impact of the global slowdown in fundraising and buyout activity. After a weak 2024¹, fundraising showed no sign of rebounding. Pitchbook recorded a 35 percent slump in fundraising in Q1 2025², Meanwhile, UK M&A activity has been choppy with overall deal value improving year-on-year in 2024³, only to drop by nearly 30 percent year-on-year in Q1 2025⁴.

One segment of the UK private equity ecosystem that has managed to hold steady through this period of deal and fundraising dislocation is the lower mid-market (LMM), where firms have continued to raise new funds successfully and sustain deployment and exit activity.

UK LMM managers that have closed new vehicles in 2025, in the toughest fundraising market since the 2008 global financial crisis, include Palatine Private Equity, which closed its fifth and largest ever fund on £254 million in April⁵, Queen’s Park Equity, which closed its oversubscribed sophomore fund on £305 million at the end of March after just four months on road⁶, and mid-market stalwart CBPE Capital closed its 11th vintage fund on its £714 million hard cap within four months of launching⁷. LMM managers in the UK have also been able to buck the wider global trend of slow exit activity and weak distributions to investors (global distributions as a percentage of net asset value came in at just 11 percent in 2024, the lowest share in more than ten years, according to Bain & Co analysis⁸).

In April, UK house Mobeus Equity Partners, for example, sold cleaning products manufacturer Star Brands to New York-listed RPM International after overseeing a five-fold increase in sales and 15x increase in EBITDA (earnings before interest, taxes, depreciation and amortisation) through its hold period⁹, while Palatine secured a 2.7x money return from the sale of fund administration business Suntera Global to US buyout firm Valeas Capital Partners¹⁰, and NVM Private Equity landed two exits within six weeks with the sales of tech travel business Intuitive¹¹ and gas measurement services business nZero Group¹².

LMM M&A activity on the investment side has proven more stable than the overall UK deal market too. Figures from law firm White & Case show the delta between LMM UK M&A deal value (enterprise value in the $5 million-$99 million) at the peak of the market in 2021 and bottom of the deal cycle in 2023¹³ coming in at around 22 percent, versus 55 percent for the overall UK M&A market¹⁴.

The relative stability of UK LMM fundraising and deal activity has highlighted the strengths of the market, and the ability of UK LMM managers to sustain deployment and distributions across cycles. Unlike large cap managers, who rely on capital markets to fund buyouts and secure exits, and can be exposed to global capital market volatility and interest rate cyclicality, LMM franchises do not rely on leverage to fund new deals and drive returns. 

The levers that typically drive LMM investment strategies -  professionalising management teams, digitalisation of product and service delivery, and entering new markets – are less correlated to the macro-economic backdrop and can be executed through market cycles. LMM dealmakers will also usually be backing younger, entrepreneurial businesses with a longer growth path than larger, maturer companies.

The resilience of the UK LMM through the last 18–24 months has seen private equity managers and their investors reappraise their long-term strategies and portfolio allocations.

Typically, the journey for the private equity manager would be to build a track record and returns in the LMM and then gradually leverage that performance to secure support from more investors and raise larger funds over time. Raising a larger fund does offer the promise of higher fee income and larger carried interest payouts, so targeting larger fund and deals has been an obvious trajectory for ambitious managers to follow.

Investors, meanwhile, also leant more towards backing larger funds, managed by firms with track records and scale, and investing in bigger companies. Macro-economic and geopolitical disruption, however, has given stakeholders reason to pause and reassess strategic priorities.

Managers have noted that the different skill sets and parameters that come with investing in bigger ticket deals are often distinct from the playbooks and networks that delivered results at the smaller end of the market. 

Large ticket deal processes will almost always be intermediated and competitive, with success more dependent on corporate finance firm relationships and slick deal structuring and execution. This contrasts to the bilateral and primary deals that are typical of the LMM, where building rapport with management teams and more operational heavy lifting are the predictors of deal success.

Recognising this, managers are now taking a more cautious approach to fund size when about to go on the road, or raising separate LMM vehicles that allow them to retain a presence in their core market as their flagship funds increase in size and invest in larger companies.

Managers such as MML and Inflexion Private Equity are among the firms that have raised smaller enterprise funds to maintain a presence in the LMM as their other fund series increase in size and move up the deal curve. At a point in the market where investors and dealmakers are facing fundraising and exit bottlenecks, private equity GPs and LPs are leaning into the LMM and acknowledging that bigger isn’t always necessarily better.

^{1. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/1/global-private-equity-fundraising-sinks-for-3rd-straight-year-87110906}  

^{2. https://www.privateequitywire.co.uk/pe-fundraising-slumps-35-amid-ongoing-exit-logjam/}

^{3. https://whcs.law/44rR2Sr} 

^{4. https://whcs.law/4niRTxk} 

^{5. https://www.thebusinessdesk.com/northwest/news/2150956-palatine-raises-254m-for-fifth-buyout-fund-biggest-yet-in-toughest-market} 

^{6. https://www.qpequity.com/news/articles/qpe-announces-closing-of-fund-ii/} 

^{7. https://www.cbpe.com/insights/cbpe-announces-first-and-final-close-of-cbpe-fund-xi-at-714m-hard-cap} 

^{8. https://www.bain.com/globalassets/noindex/2025/bain-report_global-private-equity-report-2025.pdf} 

^{9. https://www.mobeus.co.uk/news/sale-of-star-brands-agreed/} 

^{10. https://palatinepe.com/palatine-exits-suntera-global-after-transformative-growth/} 

^{11. https://nvm.co.uk/press-releases/intuitive-exit/} 

^{12. https://nvm.co.uk/press-releases/second-exit-six-weeks/} 

^{13. https://whcs.law/3GnlLrK} 

^{14. https://whcs.law/44rR2Sr}