YFM sets out 2026 outlook as confidence returns to the Southern market

YFM, UK’s regional private equity company, has outlined its priorities and predictions for 2026, highlighting a more confident Southern market as deal flow improves, valuations settles and management teams return to growth plans. With significant capital for deployment, the firm expects stronger activity across the region as founders look for investment partners able to support expansion.

Southern Economy & Regional Outlook

London and the South-East will continue to generate a significant share of deal activity in 2026, driven by their concentration of high-growth sectors and access to talent, capital and international networks. Across the wider Southern economy, strengths including knowledge-based industries, strong university ecosystems and global connectivity will make the region an attractive region for private equity investment.

Confidence returning to the Southern market

David Wrench, Partner – Head of New Investments South at YFM shares his insights: “Confidence is improving as the Southern market shows clearer signs of recovery. Deal flow improved through the second half of 2025 alongside business confidence, and we are well positioned to support high quality management teams and growth-oriented businesses in 2026. Stabilising valuations are helping buyers and sellers align, with resilient businesses continuing to command premium pricing that reflects the value of strong leadership and clear strategies.”

Regional opportunities widen beyond London

Wrench continues: “London and the South-East remain central to activity, but momentum is spreading across the wider region. Bristol and the South-West, Thames Valley, the South Coast and the corridor from Cambridge to Essex will all be important next year. The advance of AI and automation in every sector strengthens our technology-led and sector agnostic approach.”

“The Southern economy remains well supported by knowledge industries, university ecosystems and strong international links with the following areas to watch for:

• Cambridge and East Region for life sciences and deep tech
• Bristol and the South West for advanced engineering and creative digital
• Thames Valley for data infrastructure and SaaS
• London for financial services and fintech
• South Coast for niche manufacturing and maritime innovation

These factors continue to make the region a compelling destination for private equity.”

Entrepreneurs increasingly open to private equity

Wrench continues: “Founders are more willing to explore private equity partnerships with strategic and operation support alongside capital after several years of hesitation. Demand for growth capital and buy and build strategies remains strong.”

“After a relatively slow start to 2025, pipeline strengthened through the year and we are optimistic that this will continue into 2026. As stability returns after the Autumn Budget, we anticipate a rise in transactions from both new investments and follow-on activity across our portfolio and confidence amongst management teams. Strong management teams in resilient sectors will always trade at strong multiples, while weaker businesses may struggle to transact. This divergence underlines the importance of building a strong team and being laser focussed on driving growth strategies.”

Sectors expected to lead the way
• Tech enabled services including AI, SaaS and cloud
• Healthcare and life sciences
• Business services such as outsourcing and compliance
• Data infrastructure and cybersecurity

MBO activity on the rise

Wrench says: “We expect an increase in MBOs across the South as long-serving owners plan succession after enduring a turbulent period over the last few years. Management teams are more confident in sectors with strong fundamentals, although they remain cautious around leverage. This makes the choice of investment partner and how they operate and look to structure deals on the way in and support along the journey increasingly important.”

Exit conditions improving

On exit conditions improving, Wrench says: “Exit conditions improved through 2025 and we expect that trend to continue. International buyers, particularly from the US, have returned as valuations stabilise and the economic outlook becomes more predictable.”

“Operational challenges for Southern portfolio companies are likely to centre on talent acquisition and retention in tech focussed roles, digital transformation as businesses adapt to technology changes and margin pressure, driven by wage inflation and supply chain complexity.”

Wildcard prediction for 2026

Wrench concludes: “We expect a surge in cross border deals. Southern businesses are attracting growing interest from North American and Asian investors as currency conditions settle and the UK’s innovation edge strengthens. A further surprise may come from markets outside London, where growth could exceed expectations and draw more private equity activity.”