From market volatility to a renewed focus on exits, private equity continues to reward disciplined execution over the long term, writes Michael Mowlem.
Lara Croft, the titular character in Tomb Raider, the last video game I mastered, said (quoting her idol, the explorer Sir Francis Drake) “there must be a beginning of any great matter, but the continuing unto the end until it be thoroughly finished, yields the true glory.”
Admittedly, commentaries about private equity rarely commence with quotes from video games. However in a year where a buyout involving a video game developer could represent close to 4% of total global private equity deal value, perhaps our worlds are coalescing!
There is certainly a parallel between the what the hero of one of the highest grossing gaming franchises quoted and the journey of any private equity investment. Glory is not achieved through the due diligence and investment phase of an acquisition – it lies in the disciplined execution through to an exit. Here at Connection Capital, with exit conditions tentatively improving, we are reviewing our own portfolio of businesses and identifying strong candidates to prepare for potential sale in 2026
Coming back to the take-private of US-listed games producer Electronic Arts for $55bn, 2025 may come to be defined as being a highly active year for global private equity, with global deal value of over £1trn1. Here are my thoughts on the other key themes of 2025 and looking forward to 2026.
Private equity as a shelter from volatility
Earlier this year I wrote about private equity offering a relative shelter from the volatility of public markets. This article was written after a period of public market volatility, following President Trump’s “Independence Day”.
Valuations of private equity investments remained insulated from these wild gyrations, although the highly public negotiations around the imposition of tariffs themselves led to delays in deal making. In the UK, the amount of new private equity transactions dipped in the early part of the year, losing the momentum shown in 2024.
Encouragingly, activity recovered in latter quarters and private equity investors have been more active in the second half, albeit with mega-deals representing a smaller share of the market by volume2. This robust performance has allowed overall deal value in Europe by the end of September 2025 to match the entirety of the previous year3.
Reflections on a decade of disruption
Ten years ago, as we entered 2016, few could have predicted the shockwaves ahead – from Brexit to tariff wars, the elections of Trump and taxes on employers. The most recent UK Budget initially appeared benign for corporate Britain compared to the previous year. However as details have emerged, such as changes in business rates impacting smaller multi-site operators, pension salary sacrifice caps and increases in National Minimum Wage and National Living Wage, SMEs will see some impact, especially in the hospitality sector. Notwithstanding these challenges, the UK market served by Connection Capital remains active, even if we have seen a trend of businesses coming up for sale finding predictability of trading elusive.
2026: a year of harvest
As we look ahead, signs point to 2026 being a strong year for exits. Many funds that have been in investment mode now may be preparing to harvest the results of their hard work. Liquidity tools such as continuation funds and secondaries funds are providing additional outlets for value realisation, while at the higher end of the market, there may even be signs of renewed activity in the IPO space. Blackstone recently noted its IPO pipeline had increased materially over the past year4.
According to a survey carried out by Ontario Teachers’ Pension Plan (‘OTPP’) with market research company IPSOS5 of 1,270 ‘dealmakers’ across the world – including senior executives across private equity, VC, investment banking, advisory, pensions and sovereign wealth funds in the US, UK, Europe, Australia, Brazil, Canada, India and Singapore - 73% were positive about the overall investment environment, with an even higher proportion (81%) positive about the outlook for private markets.
In the broader economy, interest rates are anticipated to fall with market expectations of a fall of between 0.5% to 1% across the year and this will provide an additional stimulus to deal doing6. I would hope that private equity activity should maintain the momentum we have seen in the second half of the year.
What to expect from Connection Capital in 2026
At Connection Capital, we will continue our strategy of seeking out private investment opportunities across our own lead deals, third party funds and co-investments alongside high quality managers.
We will focus on seeking out exceptional SME businesses to invest in. We have considered investment themes around business services, energy and defence as well as growth businesses utilising proven technology (including AI) where we can assess investment risk, including an opportunity we are reviewing that provides services to support the video games industry.
Across our portfolio we have seen benefits of our investment strategy to support SMEs over the past year. For example, our investment in Winder Power has tapped into the UK’s need to upgrade its energy infrastructure to meet growing demand and we are supporting the business through investment in providing additional production capacity to meet this demand. Portfolio company Cargostore has grown its business this year through a strategic bolt-on acquisition.
Finally an appeal to our clients. We are always keen to meet management teams of high quality UK SMEs with the vision to grow their businesses. Our network of clients has always been a rich source of such opportunities so please do get in touch!
The modern-day virtual explorer I mentioned at the start of this note revered the real world explorer Sir Francis Drake. He was a wise man who also said “great things have small beginnings”. At Connection Capital we will continue to support SMEs with private capital and help grow businesses to the next stage towards an exit. In private equity, as in exploration, beginnings matter, but true glory lies in finishing the journey.
Sources
- KPMG: $1.5tn global PE deal volume (end Q3 2025), converted at HMRC Sept 2025 monthly rate
- KPMG (2025). Pulse of Private Equity Q2 2025.
- KPMG (2025). Pulse of Private Equity: EMEA overview.
- Reuters (2025). Blackstone quarterly profit jumps 48% on private equity, credit strength.
- Ipsos (2025). OTPP 2025 Data Release.
- KPMG (2025). PE investment globally hits $1.5 trillion in first three quarters of 2025, KPMG press release (global PE investment total)