Artificial Intelligence: The inexorable march
Artificial intelligence is rapidly becoming one of the most influential forces shaping the UK mid-market M&A landscape, with implications that extend well beyond the technology sector itself. Previous waves of innovation have influenced deal activity and AI is no different, affecting how businesses are valued, how strategies are defined and how acquisition targets are assessed.
The dataset captures this shift most clearly in technology deal activity. After a sustained period of growth, acquisitions in the sector declined sharply in 2025, particularly among private equity-backed acquirers. At a surface level, this could be viewed as reflecting cyclical cooling. However, in practice, it points to something more fundamental: a market reassessing the long-term viability and positioning of technology assets in light of AI-driven disruption.
This reassessment has been accompanied by a broad-based recalibration of valuations. Buyers and sellers alike have had to adjust expectations, as the market moves away from the premium multiples seen for SaaS businesses towards a more measured and evidence-driven approach. As Paddy McGwire, Senior Partner at Silverpeak AI notes, “There has been an across the board downward valuation. Although dramatic, it is helpful that this has been so universal and public, as it causes buyer and seller value expectations to move in tandem, avoiding an 18-24 month transaction paralysis during seller value expectation adjustment.”
Beyond valuation, AI is acting as a powerful filter, sharpening the distinction between businesses that are well positioned for the next phase of technological development and those that are not. The market is beginning to shift towards rewarding companies that can demonstrate a clear and credible approach to AI, particularly where that is underpinned by proprietary data, vertical specialisation or embedded functionality within core products and services. It is now increasingly critical for business owners looking to exit, that they are able to elucidate to acquirers the approach to and impact of AI on their business.
TECH BOLT-ON ACTIVITY TBC
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Conversely, businesses that lack a coherent AI narrative are finding it harder to attract interest. The growing sensitivity to “AI washing”, where businesses overstate their capabilities or strategic positioning, is reinforcing this dynamic, with investors placing greater emphasis on demonstrable application and commercial impact.
As Mark Williams, Head of Technology Advisory, Europe at Canaccord Genuity observes, “the market is becoming increasingly binary - high-quality, vertically focused assets with strong data moats attract strong interest, while more generic services businesses struggle.” This bifurcation is becoming more pronounced, not just within technology, but across sectors where digital capability is increasingly integral to value creation.
Buyers are not only assessing whether a target has a credible AI strategy, but also whether that capability can be successfully integrated and scaled within a broader platform. For corporate acquirers in particular, this presents both an opportunity and a challenge: the ability to embed AI-driven enhancements across existing operations can be a powerful value lever, but only where the underlying infrastructure and organisational capabilities are in place.
Robin Lawson of Bridgepoint captures the increasing importance of this shifting dynamic, noting that “if a management team doesn’t have a clear AI story, the business is effectively unsellable.”
Paddy McGwire of Silverpeak concludes that “buyers and investors are now focussed on what the AI moat is. The concern is whether there will be a proliferation of AI based competitors who can destroy your business in a short time frame.”
These comments reflect a broader shift where, taken together, these suggest that AI is not simply part of the valuation mechanics within buy-and-build activity, it is now influencing that activity. It is altering which businesses are considered attractive, how they are valued and how acquisition strategies are constructed.
Buyers and investors are now focussed on what the AI moat is. The concern is whether there will be a proliferation of AI based competitors who can destroy your business in a short time frame.
Paddy MccGwire, Senior Partner, Silverpeak