Raising private equity funds is seen as the holy grail for businesses who want to grow quickly, simply because the strength of capital opens the door for rapid growth.

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If your business has an innovative product that can disrupt the market as well as strong figures that suggest it can generate a large profit within five years, it’s very likely that a private equity company will be interested in you.

The idea of raising private equity is appealing for many; you can avoid pursuing methods of funding like entering the stock market where you face increased regulation, a larger board of directors and potentially a large group of public shareholders.

Private equity investors are always looking for the next big thing and they will offer their expertise for a slice of future profits. As of the end of 2024, there was £190 trillion in unspent private equity money (colloquially known as dry powder) from UK-based private capital funds. However, there are lots of critical points to consider before you decide to give up some control of your business to a private equity house.

In this guide we speak to a range of businesses who have raised private equity funding and what the best way of raising private equity funds are for UK firms.

We hope that the stories in this guide will inspire you to take the next important step of scaling-up your business and taking on the opportunities that are out there for your company.

Rob Myers, senior partner and UK head at Equistone Partners Europe explains how over the past 30 years, private equity has evolved into a central component of the European corporate funding landscape – particularly in the UK.

The standard private equity model involves a firm raising capital from a number of institutional investors, such as pension funds and sovereign wealth funds, and investing this money on their behalf into privately owned companies. Typically, the private equity firm will hold a majority ownership stake in the company, with the management team also owning a significant share of the equity. The management team continue to run the business on a day-to-day basis with strategic guidance and support from the private equity firm. After a period of approximately three to seven years the company would seek an exit, either in the form of a sale to another buyer or a public listing. This shared equity participation creates the alignment of interest between investors and managers, which has acted as a highly effective catalyst for the value creation that occurs when private equity-backed companies grow.

For institutional investors, therefore, private equity can offer exposure to fast-growing, high-potential, mid-sized private companies at a comparatively earlier stage of their growth trajectory than is available through the capital markets.

What is private equity and how does it work?

For founder-owners and entrepreneurs, selling a material stake in the business to a private equity investor, often simultaneously with the broadening of ownership amongst the wider management team, can provide the business with long-term investment to fund ambitious growth plans. It also offers access to the private equity firm’s valuable experience of supporting companies’ expansion, both organically and through acquisitions. Moreover, it enables owner-managers to realise value from the company, while either continuing to run the business day-to-day or handing over to the next generation of managers, as well as retaining a shareholding in a business funded and supported to grow in value.

These have been the established dynamics of the private equity industry for decades, but there are several trends specific to the current market.

Private equity market in 2025

According to KPMG, the UK private equity rebound of 2024 stalled in the first half of 2025. In fact, activity dipped to the lowest level since 2020. Alex Hartley, head of corporate finance at KPMG UK, told Insider Media: “As we headed into 2025 off the back of strong deal numbers last year, the expectation was that M&A activity would continue to pick up. But economic uncertainty, driven by geopolitical events and nervousness around the impact of tariffs, has meant that the deals market has been slightly more volatile so far this year, and getting deals over the line is taking longer.

“That said, the mood remains cautiously optimistic, and there are still sectors where appetite remains strong, such as business services, healthcare and technology, media and telecoms.”

Competitive environment

For business-owners looking to raise private equity investment, the ready availability of capital is a clear positive. Competition among private equity investors will allow those companies seeking to raise money to find the partner that represents the best fit from the perspective of culture, style, and potential to add value.

However, these conditions do create challenges for private equity firms, who have committed to deploying a fixed amount of capital within a specified timeframe and to generating a defined level of return for their investors. The risk for businesses is that these private equity firms try to offset the price inflation created by heightened competition for attractive companies by applying more leverage to the companies in which they invest, in order to boost the returns they generate for their investors.

A private equity investor’s track record in structuring their investments conservatively, supporting sustainable growth at their portfolio companies, and adhering to a set of established investment principles throughout the economic cycle has great importance.

Another way in which private equity firms are reacting to the competitive environment is by broadening their deal origination capabilities. There is an economic incentive for private equity investors to develop extensive networks in the UK regions, look at transactions with a greater degree of complexity, and develop specialisation in less popular sectors in order to source deals to which peers are less attracted. For entrepreneurs operating in locations, sectors, or situations where long-term investment has typically been harder to secure, this is an encouraging trend.

Impact of Brexit

Brexit, perhaps the other most prominent issue facing the UK private equity industry, presents a very different set of considerations. Industry observers have variously expressed concern that Britain’s departure from the European Union could jeopardise the financial health of private equity-owned companies or cause a precipitous fall in the levels of foreign investment into UK-focused private equity funds.

What’s clear is that, in the years since the referendum, levels of private equity activity in the UK have been remarkably resilient. CMBOR data shows that, after a sharp fall in total UK buyout values in the six months following the vote in 2016, they doubled year-on-year in 2017 to account for 30 per cent of the European total, reflecting the continued importance of private equity to the UK’s mid-sized companies.

But the Brexit vote has placed greater strain on certain UK companies owned by private equity firms. While export-oriented businesses, for example, have benefited from the weaker pound, the decline in consumer confidence has created a more challenging operating environment for high-street businesses, many of which had attracted private equity investment prior to the referendum.

An element of the additional risk associated with investing in the UK in the backdrop of Brexit is offset for those firms investing euro- or dollar-denominated funds, given the depreciation of sterling since the referendum. Nonetheless, the economic and political uncertainty associated with the Brexit process has made investing in the UK relatively more challenging. This is accentuated by the apparent political stability and improving economic performance of the Eurozone, bolstered by the advent of the Macron administration in France and the eventual re-establishment of the German coalition. By contrast, there remains a high level of uncertainty about the final destination of the Brexit process. Any manager seeking to raise capital to invest exclusively in the UK over the coming five years can therefore expect to meet a degree of investor scrutiny.

The table below from Palladium Digital shows the number of deals in Q3 2023 by sector.

Proven track records

However, UK entrepreneurs hoping to raise money from private equity need not fear a turning-off of the tap. While a slowdown in fundraising by UK-focused funds is eminently possible, we see pan-European funds with a proven track record of successfully investing across geographies continuing to flexibly deploy capital in different markets, including the UK, in response to geopolitical developments.

The key attribute of the leading private equity firms is a demonstrated ability to generate attractive returns through the cycle. Whilst current market conditions and the specific challenges facing the UK industry are likely to test this ability, we believe that private equity will maintain its established and important role of supporting the growth of the UK’s mid-sized companies over the long term.