17 August 2026

In nearly half of all UK&I M&A transaction processes (49%), advisors report that sellers' valuation expectations are too high, a gap that averages 23% and breaks the deal in 24% of those cases. Deal activity is shifting too, with larger deals gaining share, while software firms face growing pressure from AI-driven uncertainty.

These are among the key findings of the latest edition of the Dealsuite UK&I M&A Monitor, which has tracked the UK&I mid-market every six months since 2020.

A Persistent Gap, Now Quantified

Dealsuite has flagged unrealistic seller expectations as the top reason deals collapse in the UK&I market for years. This edition is the first to measure the scale directly, how often it happens, how wide the gap runs, and how often it kills the deal.

Rather than walk away, advisors are increasingly structuring around the gap. Deferred payments and other forms of risk-sharing between buyer and seller are being used more often to bridge exactly this kind of valuation divide, according to Dealsuite's Deal Terms Report, a sign that the market is adapting to the gap rather than letting it routinely kill deals.

Floyd Plettenberg, CEO of Dealsuite, says the numbers finally put a figure on something advisors have felt for years: "A deal doesn't usually fall apart because a buyer walks away for no reason. It falls apart because the seller is anchored to a number the market won't pay. Now we have measured that gap, and how often it actually breaks a deal. This is the kind of transparency that avoids dealbreakers and helps close more deals."

Buyer Competition Intensifies, Especially in IT and Healthcare

Buyer interest is strengthening across the UK&I mid-market. The average number of serious buyers per company for sale rose to 8.5 in H1-2026, up from 7.9 a year earlier. IT Services saw the sharpest increase, up three points to 12.3, followed by Healthcare & Pharmaceuticals (11.4, up 2.1) and Agri & Food (6.5, up 2.3 from a low base). 

Software Development remains the single most contested sector, drawing an average of 13 interested parties per company, even as advisors now expect deal activity there to cool. Competition eased in Construction & Engineering (6.9, down 3) and Industrial & Manufacturing (8.1, down 2), while Hospitality & Tourism held flat at 5.0.

Overall transaction volume held up well: 38% of advisors reported an increase in completed deals compared to H2-2025, against 17% reporting a decline, with the remainder stable. 

Average EBITDA Multiple Holds at 5.4

Valuations across the UK&I mid-market were broadly stable, with the average EBITDA multiple unchanged at 5.4. Business Services posted the largest gain, up 0.3 to 6.3, while Software Development remained the highest-valued sector overall at 8.0. Healthcare & Pharmaceuticals moved into second place, ahead of IT Services, which eased to 7.6.

Company size continues to be a decisive factor in valuation: multiples for smaller businesses (£200,000 EBITDA) rose to 3.6, while larger companies (£10 million EBITDA) traded at 8.2, a gap of 4.6 points, reflecting the so-called Small Firm Premium applied to compensate for the higher risk profile of smaller businesses. 

Software Deal Activity Expected to Cool Amid Growing AI Uncertainty

Looking ahead, sentiment remains firmly positive: 80% of advisors describe themselves as optimistic about H2-2026.

Advisors now expect the Software Development sector to see less deal activity in H2-2026, putting it alongside Hospitality & Tourism and Retail Trade among the sectors tipped for a decline. This marks a sharp reversal: six months ago, advisors expected the sector to grow. According to respondents, software has become less attractive due to the growing threat of AI: with automation reshaping which business models will ultimately prove viable, many buyers are choosing to hold off until that picture becomes clearer. 

On the increase side, Business Services is expected to see the largest rise in deal activity, a position it has now held for three consecutive editions, followed by IT Services and Industrial & Manufacturing.

Taken together, the data point to a UK&I mid-market that is maturing: larger deals, sharper insight into where negotiations break down, and a sector outlook increasingly shaped by how fast technology, not just economics, reshapes buyer appetite.

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