February opened with a familiar theme: headline inflation showing signs of easing while the Bank of England kept policy on hold — a combination that’s encouraging for sensible dealmaking in the £1m–£10m market.
Latest official data from the Office for National Statistics showed CPI at 3.0% in the 12 months to January, down from December — a useful tailwind for longer-run valuations because it reduces the uncertainty in buyers’ cash-flow models.
At its February meeting the Bank of England voted to maintain Bank Rate at 3.75% (the committee split 5–4), signalling that further cuts remain possible but are not yet guaranteed. That “hold but lean-lower” stance is the sort of mid-cycle clarity that encourages selective activity rather than market froth.
The growth picture remains modest. The ONS first estimate for Q4 2025 showed GDP up 0.1% quarter-on-quarter, with production nudging ahead while services were flat — the kind of flat growth that keeps buyers focused on margin stability and cash generation rather than high-risk expansion stories.
Meanwhile, consumer behaviour showed signs of caution: surveys and retail data pointed to slower spending growth as households fretted about energy and travel costs, a reminder that consumer-facing businesses may still face margin pressure even as headline inflation cools.
On the M&A front, advisers and mid-market specialists are upbeat about selective opportunities. Firms such as Crowe report renewed momentum in the lower-mid market as financing conditions ease and strategic buyers return to the market for dependable, cash-generative targets.
What this means for owners and buyers now
Sellers: focus on proving recurring revenue, tightening cash collection, and documenting customer retention — those items materially shorten buyer due diligence and support multiples in a cautious market.
Buyers: prioritise businesses where operational fixes unlock immediate margin improvement; with rates stable, financing is more predictable for sensible deals.
Deal structure: expect negotiations to emphasise downside protection (earn-outs, tighter warranties) — structure matters as much as headline price.
