A Market Rebuilding Momentum

After a fragmented and cautious 2025, early indicators suggest that 2026 is shaping up
to be a stronger year for private equity activity in the UK.

At the UK-GCC Private Capital, we are observing renewed confidence across the market,
with deal pipelines strengthening and investor sentiment gradually improving. While
last year was marked by selective deal-making and slower execution, the foundations for
a more active investment cycle are now firmly in place.

2025: A Year of Selectivity and Discipline

Despite several landmark transactions, overall deal volumes in 2025 remained below
expectations. Investors adopted a highly disciplined approach, prioritising quality
over quantity.

Capital was directed toward businesses that demonstrated:

• Strong growth potential
• Scalability and consolidation opportunities
• Operational improvement potential, particularly through technology

Sectors such as technology, healthcare, professional services, and energy transition
continued to attract the most attention, reflecting long-term structural demand.

At the UK-GCC Private Capital, we saw investors increasingly favour assets where they
had prior sector expertise, reducing risk exposure in an uncertain macroeconomic environment.

Shift Toward Bolt-On and Platform Strategies

A defining trend in 2025 was the dominance of bolt-on acquisitions over large platform deals.

Investors focused on:

• Expanding existing portfolio companies
• Driving efficiencies through integration
• Building scale gradually

However, opportunities remain for investors willing to establish new platform investments
at smaller entry points. These strategies allow for value creation through subsequent
acquisitions and operational improvements, ultimately enhancing exit multiples.

This approach is particularly relevant for GCC investors seeking to enter the UK market
with a long-term, value-driven strategy.

Longer Hold Periods Becoming the Norm

The traditional private equity model of exiting investments within three to five years is evolving.

Across the market, holding periods are extending to six or seven years, driven by:

• Challenges in achieving expected value within shorter timelines
• Valuation gaps between buyers and sellers
• Reduced IPO activity

At the UK-GCC Private Capital, we are seeing investors adopt a more patient capital
approach, focusing on long-term value creation rather than accelerated exits.

Liquidity Pressures and New Exit Solutions

Extended holding periods have created pressure from limited partners (LPs) seeking liquidity.

In response, general partners (GPs) are increasingly adopting alternative solutions, including:

• Continuation vehicles, allowing assets to transfer between funds while providing partial liquidity
• Minority reinvestments and co-investment structures

These strategies are no longer viewed as last-resort options but as sophisticated tools
to optimise returns while maintaining exposure to high-performing assets.

Rise of Secondary Transactions

Another notable trend has been the increase in secondary buyouts, where private equity
firms acquire assets from other sponsors.

These transactions:

• Reflect continued demand for quality assets
• Provide liquidity in a slower exit environment
• Have driven changes in deal structuring and insurance practices

At the UK-GCC Private Capital, we expect this trend to continue as investors seek flexibility
in capital recycling.

2026: Signs of Acceleration

Toward the end of 2025 and into early 2026, market activity has begun to pick up.

We are seeing:

• Increased circulation of investment opportunities
• Stronger pipelines for new platform deals
• Growing interest in management buy-in transactions

Encouragingly, the gap between buyer and seller expectations is beginning to narrow,
supporting a more active deal environment.

Dry Powder and Exit Pressure Driving Deals

The global private equity market is currently sitting on significant levels of
unallocated capital, while a large number of portfolio companies are awaiting exit.

At the same time:

• LPs are seeking distributions
• Management teams are under pressure to deliver growth
• Investors are looking to deploy capital efficiently

These factors are expected to drive increased deal activity throughout 2026.

Geopolitics: Risk, But Also Resilience

Geopolitical uncertainty remains a key consideration, particularly with ongoing tensions
in the Middle East and other global developments.

However, recent years have demonstrated that private equity markets are highly adaptable.
Investors have navigated disruptions including the pandemic, energy crises, and
geopolitical conflicts—emerging with more resilient and diversified strategies.

At the UK-GCC Private Capital, we believe that while geopolitical risks may influence
sentiment, they are unlikely to halt deal-making momentum.

Emerging Investment Themes: Defence and Dual-Use Technologies

With increased government spending on defence across Europe, new opportunities are emerging.

Investors are exploring sectors including:

• Cybersecurity
• Autonomous systems
• Advanced technologies

These areas offer both civilian and strategic applications and are gaining traction
within broader investment strategies.

AI: Transforming Private Equity

Artificial intelligence is becoming a defining force in private equity.

Investors are evaluating:

• The impact of AI on business models
• Long-term sustainability of portfolio companies
• Potential disruption across sectors

AI is also reshaping deal execution by:

• Enhancing due diligence processes
• Improving data analysis
• Streamlining underwriting and risk assessment

At the UK-GCC Private Capital, we see AI as both an opportunity and a challenge—one
that will redefine how value is created in private equity.