The UK economy continues to present a mixed picture. Overall growth remains subdued, but this headline view masks significant variation across sectors and regions. For owner-managed businesses in the North West, this divergence is particularly important, as many locally owned companies continue to perform well despite wider economic uncertainty.
Across manufacturing, professional services, technology and healthcare – all sectors with a strong North West footprint – many owner-managed businesses have proven resilient. Management teams have responded to rising costs and softer demand by tightening operations, investing selectively and focusing on sustainable profitability. As a result, many businesses are in better shape than might be assumed from the broader economic narrative, which is helping to underpin confidence in the regional deals market.
Looking ahead, I expect M&A activity in the North West to build steadily over the next 12 months. For many owner-managers, the last two years have been characterised by caution. Political uncertainty, inflation and rapidly rising interest rates led some to defer exit plans, succession strategies or growth-by-acquisition ambitions. In particular, nervousness following the last two UK Budgets created hesitation around valuations, tax outcomes and future cash flows. However, I am seeing that nervousness is now beginning to ease.
While uncertainty has not disappeared altogether, business owners are becoming more comfortable with the current environment. Buyers and sellers are increasingly aligned on price expectations, and there is greater realism around deal structures, including earn-outs and deferred consideration. As a result, confidence is gradually returning, supporting a more active M&A pipeline.
Interest rates, of course, remain a central consideration for owner-managed deals, particularly where funding is required for leveraged transactions or bolt-on acquisitions. Recent reductions have been modest, but they have helped improve sentiment and, importantly, provided greater clarity on the likely direction of travel. This stability allows owners to plan transactions with more confidence, even if rates remain higher than historic lows.
My feeling is that funding costs will decline slightly over the coming months, marginally improving the viability of deals that may previously have struggled to stack up. In the owner-managed market, where transactions are often more sensitive to cash flow and debt service, even small reductions in interest rates can materially improve affordability and lender appetite.
The funding environment is also showing signs of gradual improvement more generally. Lower borrowing costs may encourage owners to revisit acquisitions, refinancings or succession solutions that were paused during the period of heightened uncertainty. While lenders remain cautious, there is increasing support for well-prepared businesses with strong management teams, robust financial information and a clear strategic rationale.
Crucially, small improvements in capital availability can make a significant difference to transactions at the margins. For owner-managers considering an exit, a partial sale, or a transition to the next generation, this shift could open up options that were previously unavailable.
Overall, while the economic backdrop remains challenging, the outlook for corporate finance and deal activity in the North West is increasingly positive for owner-managed businesses. Confidence is rebuilding, funding conditions are becoming more supportive, and high-quality businesses continue to attract interest. For owners considering a transaction in the next one to three years, now is an opportune time to review options, prepare early and seek advice to ensure they are well positioned when market conditions align.
