Mid-Market Leveraged Finance: Themes and Trends - Deal volume and market sentiment

This article is the first in a series of five which look at some of the deal and document trends the Shoosmiths leveraged finance team have seen in the mid-market in 2025. Please get in touch with Shoosmiths’ leveraged finance team if you would like to discuss anything in this article. 

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We have seen an uptick in M&A activity in Q2 and into Q3. Acquisitive clients are taking advantage of a more stable interest rate environment and continuing competitive lender terms. Clients with non-core assets are also making the most of the competitive market and ‘tidying up’ corporate groups (with consequential bolt-ons and portfolio building for others). Economic instability has resulted in  caution during the diligence phase which has led to false starts on some deals, and delayed timetables on others. Conversely, nervousness caused by recent market fluctuations and global political issues has driven a number of deals to be executed on extremely short timelines. 

Despite the uptick, investor clients are still planning for longer holds which has resulted in a requirement for flexibility around portability. There are often requests to allow continuation vehicles to step into investor shoes and we’re also seeing lenders allow porting to funds on approved new sponsor lists (although the conditions are subject to heavy negotiation and will always include KYC and a maximum number of ports as well as, for example, certain minimum covenant threshold triggers). 

We’ve seen a remarkable level of pragmatism from both lender and borrower clients in response to the US tariffs. Most seem to be managing to hold their nerve whilst the dust settles despite the shakes in the global stock markets. Anecdotally, domestic level budget changes in relation to NI contributions and the national living wage, have had a more immediate impact on mid-market businesses. The statistics do back this up, with the Office for National Statistics reporting that the UK unemployment rate increased to 4.6% in the three months to the end of April – the highest rate since the summer of 2021.   There is clearly the Autumn budget to come which may add further pressures here.

Need to know: Borrower and lender pragmatism prevails, but plan in flexibility to deal timelines, pre-empt portability requirements, and be ready for potential post-November Budget shake-ups.