Against the dramatic backdrop of a hail-hit Manchester city centre we welcomed a hand-picked group of private equity investors and alternative lenders to 20 Stories for an intimate roundtable lunch on the outlook for the mid-market.
With snow visible on the tops in the distance and global uncertainty looming over the economy the setting was striking. But the conversation itself was even sharper.
Hosted by myself, Craig Cheetham, Peter Williams, 15 guests across from the investment and lending community got together to explore the themes shaping dealmaking, lending appetite and portfolio strategy as we head further into 2026.
Guests also heard from Gav Jones, from CP’s in-house M&A team who shared an honest perspective on what it really takes to scale a PE-backed business at pace. That mix of investor, lender, adviser and operator insight gave the roundtable real depth. It made for a discussion that was both commercially grounded and highly relevant to the market conditions ahead.
A MARKET SPLIT IN TWO
One of the clearest messages to emerge from the discussion was that the market remains firmly divided.
High quality businesses with strong fundamentals, credible leadership teams and resilient trading are continuing to attract investment and command healthy valuations. For those businesses capital is available and appetite remains strong.
But for companies carrying operational issues, inconsistent performance or uncertainty around strategy the picture is very different.
Deals involving businesses with volatility in trading, unclear growth stories or management teams that appear not to be fully in control are proving much harder to transact. In those cases, buyers and lenders alike are becoming more selective, more forensic and in some cases simply walking away.
In short, the market is moving but only for the right opportunities.
DRY POWDER IS THERE. DEPLOYMENT IS THE DILEMMA
There was broad agreement around another defining feature of the current market. There is still plenty of money to be invested.
Both PE houses and debt funds continue to hold significant amounts of “dry powder”, giving them the fire power to invest.
However, this doesn’t mean everyone is rushing to deploy. A recurring theme was the risk of investors becoming too cautious. If they stick with a “wait and see” approach for too long this could cause issue. Funds that don’t put their capital to work within the right timeframe may find themselves on the backfoot when they come to raise funds for their next vehicle Investors expect their money to be deployed not parked indefinitely whatever the geopolitical considerations.
SECTOR APPETITE IS SHIFTING
Sector selection is becoming more nuanced.
Some areas that were once viewed as obvious crowd-pleasers are now attracting more caution. Others are moving back into favour in ways that would have seemed unlikely a few years back.
SOFTWARE AND SaaS
Traditionally exciting areas like software, particularly SaaS, are coming under more scrutiny. They’re proving difficult to price with AI creating fresh uncertainty around business model durability.
Defence
Historically many funds would have ruled the sector out altogether. That position is softening particularly where businesses are focussed on genuinely defensive technologies or infrastructure rather than offensive capability.
energy services
Unsurprisingly energy services have moved up the agenda. With geopolitical instability including the current conflict involving Iran and the Middle East brining renewed attention to energy security and resilience. The sector is once again being seen as strategically important, particularly in the UK context.
service industries
Meanwhile service based industries that efficiently place people into essential roles are also regaining appeal. Areas such as hard FM and healthcare services were highlighted as examples of sectors where demand remains durable and the underlying investment case feels more tangible.
AI: EVERYTHING EVERYWHERE AND ALL AT ONCE
If one topic hovered over almost every part of the conversation it was AI.
Not because any of us think we’ve cracked what AI means for business but because everyone now accepts that it will have an impact. It’s not possible to always know what the impact is likely to be and trying to guess those is futile.
The businesses and leadership teams likely to win backing are those showing agility, openness and a willingness to evolve. Embracing opportunities rather than taking a rigid stance or refusing to accept there will be change.
Reasons to be cheerful
Alongside market mechanics and sector appetite the roundtable also touched on the wider forces shaping confidence across the mid-market.
With interest rates and inflation coming down and pent-up demand by business owners wanting to de-risk by bringing in investment growing there’s room for optimism. That should create opportunities across the mid-market provided broader geopolitical events don’t knock confidence off course.
Want to be part of the conversation? Whether you’re looking at investment, fundraising, debt options or your next strategic move get in touch and we can talk.
