Introduction

When you have spent years building a business, choosing how to exit is not simply a transaction. It is a strategic and personal decision that shapes your wealth, your reputation, and what happens to the organisation you created.

For UK owner‑managed businesses, the question is rarely whether there will be an exit, but how and on whose terms. Do you sell to a trade buyer who sees strategic value in what you have built? Do you partner with private equity to accelerate growth and take a second bite of the cherry? Or do you hand the business to the management team who helped you build it, through a management buyout (MBO)?

As at January 2026, the UK M&A market is offering genuine opportunity - but only for businesses that are well prepared and realistically positioned. What we are seeing is not a single market, but a two‑speed one. High‑quality, buyer‑ready businesses with clear stories are attracting competitive interest. Others are struggling to bridge valuation gaps or complete deals at all.

This article is a practical, UK‑focused guide to the three main exit routes available to owner‑managed SMEs today. It draws on recent market activity, current tax rules, and what buyers are actually prioritising in due diligence. The aim is not to push you towards a particular route, but to help you make a clear, informed decision that fits your business and your personal objectives.

The Three Exit Routes Explained

Trade Sale: the Strategic Premium

A trade sale involves selling your business to another company - usually in the same sector, or an adjacent one - seeking strategic advantage. This remains the most common exit route for UK SMEs.

In recent years, sub‑£100m transactions have continued to dominate UK deal volumes, accounting for the vast majority of completed M&A activity. Strategic buyers are active because acquiring proven capability is often faster, cheaper, and less risky than building it internally.

What trade buyers are really paying for is synergy. They may see value in your customer relationships, technology, intellectual property, geographic footprint, or sector expertise. Where those synergies are credible and quantifiable, buyers can justify paying a premium over purely financial valuations.

A good example from the UK technology and services market is the acquisition of specialist consultancies and niche operators by larger platforms looking to deepen capability quickly - often in areas such as data, automation, cybersecurity, or regulated services. In these cases, the headline multiple is less about historic profit and more about strategic acceleration.

Why owners choose a trade sale

• Potentially higher headline valuation due to strategic synergies
• Often a clean exit with cash at completion
• Clear buyer logic and integration plan
• Attractive where the sector is consolidating

The trade‑offs

• Typically a full exit, following a handover period of 6–18 months
• Limited control post‑completion
• Cultural change is likely as integration progresses

For owners who want certainty, speed, and maximum value - and are ready to step away  - a well‑run trade sale process can be compelling.

Private Equity: a Growth Partnership

Private equity has become a defining force in the UK lower‑mid‑market. Funds entered 2025 and 2026 with substantial undeployed capital, and despite selective underwriting, they remain under pressure to invest in high‑quality businesses.

Private equity buyers are fundamentally different from trade buyers. They are not buying your business to absorb it into another organisation. They are buying it to grow it, typically over a three‑ to seven‑year horizon, before exiting again.

Most PE transactions in the SME market involve a majority investment combined with a vendor rollover. As the owner, you sell most of your shares but retain a meaningful minority stake - often 10–30%. This creates what is commonly called a “second bite of the cherry”.

Why owners choose private equity

• Significant cash off the table while retaining upside
• Access to growth capital and acquisition funding
• Strategic and operational support at board level
• Opportunity to professionalise the business

PE activity has been particularly strong in sectors such as technology, business services, healthcare services, and specialist manufacturing - especially where revenues are recurring and margins are defensible. Buy‑and‑build strategies remain prevalent, with PE‑backed platforms acquiring smaller bolt‑ons to build scale quickly.

The trade‑offs

• Loss of full control and increased reporting requirements
• A defined exit timeline driven by fund economics
• More intensive due diligence and governance

For many founders, private equity works best when they still have energy for the next phase but want to de‑risk personally. It is not a passive partnership, but for the right owner, it can be highly rewarding.

Management Buyout (MBO): Continuity and Legacy

A management buyout involves selling the business to your existing management team, usually supported by external finance from banks, private equity, or specialist MBO funds.

MBOs have gained renewed attention in the UK as owners face succession challenges and seek continuity for employees and customers. Where the management team is strong and trusted, this route offers a clear legacy outcome.

In practice, most MBOs are funded through a combination of:

• Management equity (often 10–20%)
• Institutional equity or loan notes
• Senior debt secured against the business

Specialist UK funds continue to operate in this space, particularly for businesses with enterprise values in the £2m–£15m range.

Why owners choose an MBO

• Preserves culture and relationships
• High certainty of completion once funded
• Flexible transition arrangements
• Strong alignment with succession planning

The trade‑offs

• Valuations are typically lower than competitive trade sales
• Funding constraints limit price
• Requires a genuinely capable management team

MBOs work best for stable, cash‑generative businesses where success does not depend on the founder’s personal involvement.

Which Route fits your Business?

There is no universal answer. The right exit path depends on a combination of business fundamentals, sector dynamics, and your personal priorities.

Business Factors that matter

• Scale and profitability: Private equity typically looks for EBITDA of at least £500k–£1m. Trade buyers can be active across a wider range. MBOs depend on debt serviceability rather than size alone.
  
• Growth potential: PE requires a credible growth plan. If the business is mature and stable, a trade sale or MBO may be more appropriate.
  
• Management depth: A strong second‑tier team is essential for an MBO and highly valued by PE. Trade buyers are more willing to replace management post‑acquisition.
  
• Sector dynamics: Consolidating sectors favour trade sales. Fragmented sectors often attract PE buy‑and‑build strategies.

Owner Priorities

Owners often underestimate how personal this decision is.

• Maximum value: Usually points to a competitive trade sale
• Ongoing involvement: Often suits PE or staged exits
• Legacy and culture: Favours MBOs or hybrid structures
• Speed and certainty: Trade sales and funded MBOs
• Tax efficiency: Increasingly time‑sensitive

Following the Autumn 2025 Budget, Business Asset Disposal Relief (BADR) increased to 14% and is scheduled to rise again to 18% from April 2026. For gains above the £1m lifetime allowance, CGT is now higher. These changes are accelerating exit planning, but tax should support - not dictate - the decision.

Market Timing: why Preparation still Matters more than Speed

As at January 2026, interest rates have stabilised compared to their 2024 peak, improving acquisition finance conditions. Valuation gaps have narrowed, but buyers remain disciplined.

What has not changed is the intensity of due diligence. Buyers are focusing hard on:

• Quality and sustainability of earnings
• Customer concentration and contract terms
• Cybersecurity and data resilience
• ESG and governance standards

Rushing to market without addressing these areas almost always costs more in valuation than it saves in tax.

Case Insights from Today’s Market

Strategic technology acquisition

Recent UK technology acquisitions show that specialist capability commands attention. Businesses with defensible niches - particularly in data, automation, and regulated environments - continue to attract strategic premiums when positioned clearly.

Insight: Strategic value must be articulated, not assumed. Buyers pay premiums for clarity, not complexity.

Private equity buy‑and‑build platforms

PE‑backed platforms in IT services and business services continue to acquire bolt‑ons at attractive valuations where integration is straightforward.

Insight: Understanding whether you are a platform or a bolt‑on shapes both valuation and negotiating leverage.

MBOs in stable sectors

Professional services firms, regional distributors, and niche manufacturers remain well suited to MBOs where cash flows are predictable.

Insight: Succession planning is exit planning. Management capability cannot be built at the last minute.

Hybrid Structures: Growing in Relevance

The market is increasingly creative.

• Staged exits allow partial liquidity with deferred upside
• Minority PE investments fund growth without full exit
• Earn‑outs bridge valuation gaps but require careful drafting
• EOT combinations remain viable despite reduced tax relief

These structures can align interests - but only when negotiated with clarity and realism.

Getting Exit‑ready: what Buyers Expect

Regardless of route, the fundamentals are consistent.

• Clean, defensible financials
• Clear customer and revenue analysis
• Documented systems and processes
• Robust contracts and IP ownership
• Credible leadership beyond the founder

Exit readiness is not cosmetic. It is about reducing risk and protecting value.

A Practical Decision Framework

1. Clarify your personal objectives
2. Assess your business honestly
3. Understand market timing without rushing
4. Model post‑tax outcomes
5. Test the market discreetly
6. Prepare before launching a process
7. Assemble experienced advisers early

This is not about choosing the “best” exit. It is about choosing the right one for you.

Conclusion: Plan Your Exit like a Pro

The UK exit market in 2026 rewards preparation, clarity, and fit. Trade sales, private equity, and MBOs all remain viable - but only when aligned with the reality of your business and your goals.

There are no shortcuts. The difference between a good exit and a great one is rarely luck. It is the result of thoughtful planning, disciplined preparation, and choosing the right path at the right time.

If you have spent years building value, it is worth investing the time to exit properly - on your terms, with confidence, and without unnecessary risk.

Sources referenced include UK M&A market data from 2025–2026, sector transaction analysis, HM Treasury and HMRC tax updates, and publicly reported UK deal activity. This article is informational and does not constitute regulated investment advice.

About Exit Strategy & Solutions

Exit Strategy & Solutions is a specialist advisory firm helping UK SME business owners navigate the complexities of exit planning and execution. We work with founders and owner‑managers considering an exit in the next 12 to 36 months to:

• Maximise business value
• Identify the right strategic or financial buyers
• Structure transactions that protect both financial outcomes and legacy

We combine sector knowledge with an understanding of what buyers are really looking for in today’s market. Our approach combines deep market intelligence, strategic positioning expertise, and practical transaction experience to help owners achieve premium valuations and successful outcomes.

Ready to explore your exit options?

Take our Exit Readiness Calculator at www.exitstrategyandsolutions.com/exit-readiness-calculator to assess your business’s exit readiness and identify opportunities to maximize value.

Contact us: - Email: enquiry@exitstrategyandsolutions.com - Phone: 0330 043 4689 - Website: www.exitstrategyandsolutions.com