Dealmaking today: Uncertainty has a cost – don’t pay it twice

Political decisions can create sudden waves in the market – few episodes illustrate that more clearly than the Truss premiership. But markets do not wait for policies to be published or leadership contests to conclude – expectations move first, and borrowing costs follow.

Against that backdrop, the current challenge to Keir Starmer’s leadership of the Labour party – and risk of policy changes under a new leader and Prime Minister – are starting to show up in sentiment. Add in global pressures on energy prices and the wider cost of living, and the margin for error narrows quickly. For Rachel Reeves, that matters because it squeezes fiscal headroom; when the numbers no longer add up, markets immediately ask where the funding will come from.

When confidence in the fiscal direction wobbles, gilt yields increase – and that feeds straight through into the all‑in cost of debt. In the mid‑market, the impact is practical: less leverage, tighter terms and more conservative structures. Buyers either pay less, structure harder, or both.

In that environment, ‘wait and see’ is an understandable instinct. The problem is that clarity can arrive in two forms: supportive certainty that lifts confidence, or ‘bad certainty’ that locks in a tougher tax regime or a higher cost of capital. Either way, delay can mean paying twice: once in lost momentum, and again when the new reality is priced in. Right now, it is hard to see what near‑term clarity would materially improve the outlook.

And yet, despite the headlines, mid‑market transactional activity remains strong. That may feel counter‑intuitive given national and international volatility, but it speaks to the resilience of this part of the market. Our own research suggests a significant share of the activity is being driven by private equity‑backed businesses pursuing acquisition-led growth when organic growth is harder to deliver in a slower economy.

To avoid repeating earlier blogs, the key point is simple: the funding market is open. High‑street banks and alternative lenders are still keen to deploy capital, and private equity continues to sit on substantial dry powder.

That makes positioning – whether to buyers, lenders or private equity – more important than ever if you want to keep processes moving and protect value. When you go to market, a few principles consistently separate efficient outcomes from slow, value‑eroding ones:

• Be clear on objectives from day one: align stakeholders early and define what “success” looks like
• Prepare properly: a compelling equity story, supported by clean data and well positioned materials. Vendor due diligence (or vendor assist) can make the difference
• Target the right counterparties: have candid conversations and focus on the most credible, deliverable partners
• Execute with momentum: get early alignment on the key terms and drive to completion, avoiding unnecessary negotiations of points of principle

In short, macroeconomics and political stability matter, but timing a transaction is rarely a single‑variable decision. In uncertain markets, protecting value often comes from being prepared and moving with conviction – not waiting for certainty that may arrive alongside less favourable funding conditions and a tougher set of deal economics.

Find out more about PKF Francis Clark’s award-winning dealmakers.