If you’re an owner-manager considering mergers and acquisitions, the ground has shifted. Deal activity has picked up in parts of the market, while regulation and tax have moved on. For SMEs, that can feel like extra noise at the exact moment you need clarity. In this guide, we set out what’s changed and what to focus on – from market context and regulation to due diligence, deal structures, and integration planning. The aim is simple: help you approach mergers and acquisitions as a strategic opportunity, not just a compliance exercise.
The UK is still attractive for buyers and sellers, with sector-specific hotspots and private capital active where value and cashflow are resilient. At the same time, new thresholds now shape which transactions may be reviewed by the Competition and Markets Authority (CMA), and everyday tax decisions still influence whether a share or asset deal delivers better net proceeds. Mergers and acquisitions don’t need to be daunting. With the right preparation – and a calm, organised plan – SMEs can use them to accelerate growth, retire value, or reshape a business for the next phase. As your first port of call, we’re here to give straight answers, manage the detail, and keep your transaction moving.
The market context for SMEs
Recent Office for National Statistics (ONS) data shows momentum returning in places. In Q2 2025 the provisional total number of completed mergers and acquisitions involving UK companies rose to 501, up from 412 in Q1. The value of domestic deals reached £3.4bn, with inward acquisitions at £9.3bn during the quarter. These figures can be revised, but they point to steady activity and selective appetite for quality assets (ONS, 2025).
For SMEs, that translates to practical questions: are you ready for buyer scrutiny, do you have a clear equity story, and have you modelled different funding and earn-out paths? Mergers and acquisitions favour prepared businesses.
Mergers and acquisitions: The rules have shifted
From 1 January 2025, UK merger control thresholds were updated. Three headline points matter for SMEs: Turnover test: A target with UK turnover over £100m can bring a deal into scope; Safe harbour: No review where none of the enterprises has UK turnover above £10m; and Hybrid test: Where one party has at least a one-third share of supply and UK turnover over £350m, with a UK nexus, jurisdiction can also arise. For most SME transactions, the safe harbour will be welcome, but it’s important to check the details early (CMA, 2025).
Practical takeaway: Build a quick jurisdiction and timetable check into your early planning. Even if a review is unlikely, potential buyers will expect a clear view on process risk.
Due diligence that protects value
Thorough due diligence does more than identify issues – it protects pricing and avoids renegotiation late in the day. Focus your information pack on the items a buyer’s finance and risk teams care about most:
- Quality of earnings: Show normalised EBITDA, not just reported results.
- Working capital profile: Evidence seasonality and the target level for completion.
- Tax exposures: Flag any HMRC queries, VAT position, and PAYE status.
- Contracts and IP: Confirm change-of-control terms and ownership.
- People and payroll: Map key roles, incentives, and any TUPE risks.
For sellers, a light vendor-assist review can pre-empt common questions and speed up the process. For buyers, an early red-flag review can keep costs proportionate while you test price, structure, and integration fit.
Choosing a deal structure and tax outcomes
How you structure mergers and acquisitions will shape post-tax results:
- Share purchase: You acquire the company with all assets and liabilities. Sellers often prefer this route for simplicity and potential reliefs.
- Asset purchase: You acquire selected assets and trade, leaving unwanted liabilities behind. This can help manage risk, but it can be more complex where contracts and employees transfer.
- Hybrid structures: Earn-outs and rollover shares can bridge valuation gaps and align incentives.
On headline tax, the UK main rate of corporation tax is 25% for the financial year beginning 1 April 2025, with a 19% small profits rate up to £50,000 and marginal relief to £250,000. This framing affects the modelling of post-deal profits, deferred tax, and purchase price allocation (HMRC, 2025).
Where relevant, consider reliefs such as the substantial shareholding exemption (SSE) for qualifying corporate disposals, and the interaction of intangibles and capital allowances. Getting these points right early can avoid surprises at completion.
Integration planning from day one
Integration is where value is realised. Start the plan before heads of terms:
- Day-one essentials: Banking and payments run without disruption, payroll and HR ensure everyone is paid, and customer communications keep confidence high.
- Systems and data: Access and controls are assigned with clear roles, and a step-by-step migration plan sets milestones and owners.
- Operating model: Decision rights are explicit so accountabilities stick, and a regular reporting rhythm aligns KPIs and behaviours.
Keep any synergy story grounded and measurable. A 90-day plan with owners, dates, and weekly check-ins keeps everyone honest and momentum high.
Funding and valuation in an SME setting
SME deals often blend cash, vendor loan notes, and earn-outs linked to profit or revenue. Consider:
- Debt capacity: Run sensitivities on interest cover and covenant headroom.
- Earn-out design: Metrics: Simple and auditable. Behavioural incentives: Growth aligned.
- Working capital mechanisms: Completion accounts vs locked box: Protections clear.
Valuation should reflect realistic integration costs and the investment needed to hit growth assumptions. A clean, well-evidenced model will lower friction with lenders and counterparties.
How we support your transaction
We offer hands-on support at each stage – from option-testing and valuation through to diligence and close. Read more about our mergers and acquisitions services, or explore broader business advisory support if you’re weighing organic growth against a deal. Our role is to provide clear analysis, remove blockers, and keep the process moving at pace.
What this means for your next move
Mergers and acquisitions can help a good business become a stronger one – whether you’re buying to expand, merging to scale operations, or preparing for an exit. The current environment rewards preparation: assemble clean financials, know your deal breakers, and map out regulatory and tax questions early. The updated merger thresholds reduce process risk for many SMEs, while ONS data suggests that buyers remain selective rather than speculative. That combination puts well-run businesses in a solid position to transact, provided the equity story and numbers stand up to scrutiny.
If you’re a potential seller, think like a buyer: show dependable earnings, recurring revenues, and disciplined cashflow. If you’re a buyer, be disciplined on value drivers – customer retention, integration costs, and leadership bandwidth. In both cases, a simple, transparent approach builds trust and shortens timetables. Our team brings technical depth with a very personal touch, acting as your first call when decisions need to be made, day or night.
If you’d like to talk through options for mergers and acquisitions – from feasibility to completion – get in touch and we’ll give you a clear view of next steps. We’ll help you plan, price, and execute with confidence.