Rising M&A volumes mask falling valuations for advice businesses – Legal insight on what IFAs need to know

October 15, 2025

New ONS data shows a surge in UK M&A activity — but deal values tell a different story. Legal experts Helen Curtis and Prasan Modasia, Partners at Devonshires Solicitors, share their insights on what’s really driving the trend, why valuations are falling, and what IFA owners should do to protect value ahead of potential further tax and regulatory changes.

More deals, less value

New Office for National Statistics (ONS) figures show completed UK mergers and acquisitions (M&A) rose to 501 in Q2 2025 – that’s up more than 20% on the previous quarter. At first glance, that looks like a positive signal for advisers who are planning to sell or scale their firms.

But while the number of deals increased and domestic deals saw a modest uptick in value in the previous quarter, some of the other stats moved the other way:

Outward M&A (UK firms acquiring overseas) halved to £4bn.
Inward M&A (foreign buyers of UK firms) fell by £11.8bn.
Volatility was also evident month to month – April was strong, May dipped to just 138 deals, before a June managed a steady 147 deals.

The message is clear: international appetite for UK assets is weakening, and when you take a step back much of the activity seen in this last quarter is consolidation by stronger players through acquiring weaker rivals – a pattern that’s already well established in the advisory sector and is continuing just as expected.

Consolidation pressure on IFAs

Private equity interest in IFAs remains resilient, but the dominant strategy is buy-and-build: stitching together smaller firms to create scale, efficiency and stronger equity value. Recent activity by groups such as Perspective, Fairstone and Succession illustrate how this model works in practice – centralising compliance, reducing PI insurance costs, and using a common brand to cross-sell across a wider client base.

For firm owners, the implications are clear. Those eyeing an exit may find the next 12 – 18 months attractive, before valuations soften further and ahead of scheduled tax rises. Those planning to stay independent will need a clear growth plan to compete against bigger, PE-backed rivals with deeper balance sheets. Standing still is the only real risk.

Tax changes as a catalyst

The October 2024 tax changes served as a wake-up call for many business owners, and it highlighted just how quickly the landscape can shift. The sudden adjustments to reliefs and rates caught some off guard, reinforcing the importance of proactive planning and staying ahead of policy developments. For owner-managers, the experience underscored a key lesson: waiting for certainty can be costly, and those who act early are often best positioned to protect value and seize opportunities.

Just as tax policy accelerates exits, we know that Business Asset Disposal Relief (BADR) increased from 10% to 14% in April 2025, and under current legislation will rise again to 18% for disposals on or after 6 April 2026. For many owner-managers nearing retirement, that creates a strong incentive to bring forward a sale and lock in the 14% rate while it lasts.

Looking further ahead, there are concerns that the Autumn Budget may introduce additional capital gains tax reform – potentially aligning CGT rates more closely with income tax or further restricting reliefs. Even the uncertainty is enough to encourage many sellers to accelerate their succession plans.

Valuations under pressure

There is a shift in market sentiment that has been prompting a more forensic approach from buyers. Rather than chasing headline growth, we’re seeing buyers scrutinising the underlying quality of earnings and the sustainability of business models. Firms are therefore having to demonstrate robust financial controls so that they have a clear value proposition to standing out in a crowded market. For others, the combination of margin pressure and tighter funding is making it harder to command the premium valuations or even attract serious interest at all.

Falling deal values also reflect weaker fundamentals. With higher wage costs and inflation squeezing margins, many IFAs are struggling to sustain profitability. Buyers are pricing that in, which means EBITDA multiples are compressing compared with two or three years ago.

The funding climate is adding pressure. High SONIA rates are pushing up the cost of leveraged finance, and lenders are cautious about backing acquisitions that may simply fill cash-flow gaps rather than deliver growth. That is why buyers are focusing their firepower on firms with strong recurring revenue, sticky client relationships, and resilient compliance frameworks.

What advisers should do

The M&A market remains open, but success depends on preparation. Advisers should:

Review succession timelines in light of the scheduled 2026 BADR rise – the timing of a disposal could materially affect net proceeds.
Focus on profitability and operational resilience to sustain valuation multiples, particularly where minority shareholders are concerned.
Monitor the Autumn Budget closely for signals of further CGT or BADR reform.
Be realistic about buyer expectations: consolidators are targeting operational efficiency and recurring revenue, not paying premiums for underperforming books.

The bottom line

More M&A deals do not necessarily signal strength. For IFAs, the real lesson is that consolidation is reshaping the market. Those who anticipate that shift (and plan accordingly) will be best placed to protect value and seize opportunities in the months ahead.