Mergers and acquisitions in the UK have experienced something of a short-term shot in the arm recently. While the broader effects of Labour’s first Budget in 14 years are yet to play out, the prospect of the chancellor introducing a significant hike on capital gains tax (CGT) accelerated a raft of business disposals during the autumn.

As it happened, the increase to CGT announced at the end of October was far more moderate than many anticipated. However, the Budget paved the way for more M&A activity as we head into 2025, given the economic priorities of the new government are now set out.

Continued consolidation

The estate and property management industries are likely to see a significant number of deals over the next 12 months as they continue on the consolidatory path set out in recent years.

In the estate agency market, 2024 has seen traditionally London-centric operators like Foxtons – a business we have transacted with on previous disposals – expanding their footprint, while national agencies like Lomond continue to bring major operators into their fast growing portfolios, including Kinleigh Folkard and Hayward last month.

At the same time, in the property management sector, private equity-backed international platforms have also shown an increased interest in the British market. Stockholm-headquartered Odevo’s recent acquisition of national managing agent Encore, which itself had completed three complementary bolt-ons in as many years, is a good example.

With such a high level of interest and competition for deals, we would argue that we’re currently at the halfway point on the sector’s timeline for consolidation.

Notably, this means there will be fewer agencies of scale for acquisitive businesses to target next year. However, market conditions are likely to support the continued race for scale through bolt-on acquisitions, as well as more strategic purchases.

Improving market conditions

From the perspective of an estate agency looking to sell, particularly those involved more heavily in sales than lettings and management, upwardly mobile house prices generally represent a good moment in which to exit a business.

While values have wobbled through the autumn, platforms like Rightmove are currently forecasting a 4% increase in asking prices next year.

With the market having regained some momentum in 2024, there is also likely to be a surge in completions as home buyers look to beat

April’s stamp duty deadline. Mortgage rates aren’t likely to fall as fast as previously anticipated but should still decline through the year too, supporting confidence.

Elsewhere, those businesses geared towards lettings and management have generally benefited from the UK’s housing supply issues, meaning they remain a robust and resilient target for investors. While demand has fallen from record highs post-Covid, according to analysis by Savills, management agents are still seeing homes letting 20% faster than they were prior to the pandemic. Rents are also forecast to increase by 4% again in 2025, despite some tapering this year.

Opportunity knocks

With all these things considered, it’s not surprising that business owners are willing to respond to the call of the market’s acquisitive forces.

With the low-hanging fruit generally harvested, we’re now likely to see an increase in high-quality, high-value transactions. This includes the potential for more deals where successful brands and management teams are a core part of the offering, rather than just the underlying business itself.

Firms can’t just expect to be attractive solely on the merit of their growth, however. They need to come to market with a clear pitch for how they could help a buyer unlock economies of scale, and how they will help manage – not exacerbate – a purchaser’s regulatory burden.

The fact that businesses in the space are already well-professionalised in response to these regulatory asks means that, with the right approach, 2025 can be a year of positive M&A characterised by high multiples for those looking to exit a business.