Rise in Earn-Outs and Vendor Loans in UK&I Highlights Shift Toward M&A Risk Sharing

August 2025 – London – Risk sharing between buyers and sellers is becoming a defining feature of the UK&I mid-market M&A landscape. Findings from the latest UK&I M&A Monitor, a biannual study by Dealsuite, Europe’s leading platform for mid-market M&A transactions, show a notable rise in the use of earn-outs and vendor loans in the first half of 2025. Alongside stable transaction volumes, the data reflects a market that is adapting its deal structures to balance risk more evenly between both sides.

In H1-2025, 4 in 10 M&A advisors (39%) observed an increase in the use of earn-out arrangements, while 1 in 4 (26%) reported a rise in vendor loans. Both mechanisms are increasingly seen as tools to align interests, either by linking part of the transaction value to future performance or by enabling sellers to finance part of the acquisition. Warranties and indemnities remained widely applied, while about 1 in 5 advisors (22%) noted a modest uptick in asset/liability transactions.

Resilience in the ‘New Normal’

Since 2020, dealmakers in the UK&I region have navigated high inflation, rising interest rates, geopolitical tensions, and global trade frictions. While uncertainty initially slowed M&A activity, the SME segment has adjusted, showing strong resilience. In H1-2025, 37% of advisors reported transaction volumes in line with H2-2024, while 35% noted an increase.

At the same time, buyer appetite has remained robust: in H1-2025, companies offered for sale attracted on average 7.9 serious interested buyers each, only slightly below the 8.1 recorded in H1-2024. This sustained level of demand underlines the continued attractiveness of SMEs and reinforces the view that the UK&I M&A market remains a sellers’ market, despite financing headwinds and broader economic uncertainty.

Shift Toward Smaller Deals

The Monitor also revealed a decline in average deal size. Transactions above £10 million fell to 25% of all deals, compared with 34% in late 2024. In contrast, deals below £2.5 million rose by 5 percentage points and those between £2.5 and £5 million increased by 6 points. This indicates a stronger concentration in smaller transactions across the region.

Outlook: Cautious Optimism

Looking ahead to the second half of 2025, sentiment remains positive, though financing conditions are expected to tighten slightly. While 29% of advisors anticipate financing will become somewhat more difficult and 9% foresee a significant challenge, a majority still expect activity levels to hold firm.

Floyd Plettenberg, CEO of Dealsuite, commented:
“A decade ago, market turbulence often paralysed M&A activity. Today, many dealmakers have adapted to operating in an environment where uncertainty is constant. This resilience is particularly visible in the SME segment, where we continue to see healthy deal flow and an evolution in deal structures that share risk more evenly between buyer and seller. It is a sign of a more mature and strategic M&A market in the UK&I region.”

About the UK&I M&A Monitor

The UK&I M&A Monitor is based on insights from 104 leading M&A advisory firms active across the United Kingdom and Ireland, representing a significant share of mid-market transactions in the region. The study tracks transaction volumes, sector trends, valuation multiples, deal structures, and market sentiment to provide a comprehensive view of the market landscape.