The year was one of two halves in the European market, a relatively quiet first six months in terms of deal execution with sellers focusing on sale preparation, followed by a very busy second six months and a significant number of deals executed in November and December in particular.

It continues to be the case that many auction processes are run with a small and focused pool of bidders, which often sees negotiations effectively becoming bilateral very quickly. However, for prime assets, 2025 saw a resurgence in very hot auctions with multiple bidders seeking to pre-empt processes and sellers successfully running contract races, which have been rare in recent years. Even in turbulent market conditions, we have already seen this continuing in 2026 for quality assets given the challenges sponsors have faced with deployment in recent years.

We have seen a slight decrease in the number of transactions where exclusivity was granted, but an increase in the initial length of the eventual exclusivity period. Exclusivity was granted on 57% of auction processes (down from 65% in 2024). In highly competitive auctions, exclusivity is often not granted as bidders are expected to execute binding documents very shortly following final bids, so this decrease does reflect the uptick in hot auctions we saw. However, outside of this, given the trend for sale processes going bilateral earlier in the process, the average initial exclusivity period on private equity transactions increased from 35 days in 2024 to 49 days in 2025. In many cases, these exclusivity periods would then be subject to multiple extensions as cautious buyers undertook extensive due diligence, particularly relating to financials.

There was another increase in the number of deals featuring an earn-out or other deferred consideration in 2025, with 50% of private equity deals including some form of earn-out or deferred consideration, which is much higher than it had been in pre-pandemic years.

As is the case with the increase in the number of ratchets included in management equity terms in recent years, increases in deferred consideration and earn-outs show the creative ways in which buyers are seeking to bridge valuation expectations with sellers. They are often a feature on transactions where there is less competitive tension. Our expectation is that the usage of deferred consideration and earn-outs will ultimately decrease as market conditions become more benign as sellers will nearly always favour certainty of proceeds.

As in previous years, split exchange and completion remained a feature of most deals, with 63% of all deals requiring this structure, down slightly from 72% last year.

While a split exchange and completion is frequently required because of funding/drawdown necessities for sponsors and lenders, with longer gap periods required on transactions involving debt funding from credit funds which typically have longer drawdown periods than banks, increasing regulatory intervention is also driving the need for splits. Sponsors are also increasingly willing to fully equity underwrite deals though and put debt in post-completion to avoid delays to completion where there are no or limited regulatory considerations in play.

It has been increasingly common on transactions of all sizes (rather than just larger transactions as was historically the case) that a split exchange and completion is also required to necessitate some form of merger control or foreign direct investment (FDI) approval, whether due to anti-trust laws or FDI legislation (such as the National Security and Investment (NSI) Act in the UK, CFIUS in the US, FIRB in Australia or the EU's Foreign Subsidies Regulation).

The ever-increasing international scope of asset managers' portfolios, combined with low filing thresholds in a number of jurisdictions, has meant that mandatory anti-trust and FDI filings are often required even in jurisdictions where there is only a limited nexus to the transaction involved or an asset manager's wider portfolio. In 2025, 46% of all transactions which had a split exchange and completion were subject to an anti-trust and/or FDI condition.

Walkaway rights between exchange and completion, save for non-satisfaction of a condition precedent, remain very rare in UK and European asset level transactions, although material adverse change clauses are a feature of some GP stake transactions. On asset level deals, where walkaway rights are agreed, these are typically linked only to specific business risks rather than for general material adverse change. Geopolitical uncertainty may drive bidders to start seeking walkaway rights, but it is currently too early to see whether this translates to binding deal documents.

Given the increasing number of transactions requiring merger control or FDI approval, which involve longer gap periods, the practice of repeating warranties has become far more common, particularly as it has become an affordable warranty and indemnity insurance (W&I) policy enhancement. 67% of transactions with a split exchange and completion had business warranties repeated on completion, broadly similar to what was seen in 2024.

On transactions that had business warranties repeated, outside of GP stake transactions (where such provisions are more commonly negotiated), we did not see buyers having the ability to walk away or renegotiate price based on matters disclosed during the gap period. Instead, repetition of warranties continues to be used mainly to drive disclosure of material events in the gap period and give buyers the opportunity to obtain enhanced coverage under their W&I policy, enabling claims for non-disclosed (typically unknown) warranty breaches that occurred during the gap period.

However, in transactions with short gap periods, buyers will still often take the view that there is not significant value to be gained from a risk allocation perspective of having warranties repeated on completion, especially as it requires sellers to have to repeat their disclosure process. It remains the case on most transactions therefore that buyers take on most, if not all, of the risk in the business with effect from signing of the SPA.

There has not been any significant movement in warranty terms over the past year as the established widespread use of W&I in the private equity market has contributed to stable market norms and limited the number of heavily negotiated positions.

Tax covenants appeared in 74% of transactions, a slight decrease from last year. Typically, the tax covenant is subject to a £1 cap on liability and supported by W&I insurance – outside of corporate carve-outs, it remains rare for sellers to give general tax protection other than with a nominal cap as necessary to support the W&I protection.

W&I remains standard on private equity transactions. Current deal volumes and the continued entry of new insurers into the market over the past 12 months has meant that there are no capacity constraints in the market at present. Pricing has also been exceptionally low and we would only expect this to tick up again if there is a significant increase in transactions that impacts capacity or consolidation amongst underwriters.

Restrictive covenants, often found in sale and purchase agreements, shareholders' agreements, and service contracts, must be reasonable in their scope and duration in order to be enforceable.

Throughout the UK and Europe, a 24-month term is typically the longest enforceable period in a sale and purchase agreement unless there are strong reasons to extend it (for example, businesses with heavy intellectual property aspects, where competition from the covenantor could seriously damage the target business).

In 2025, the most frequently observed duration was 24 months in sale and purchase agreements, although anything between 12 – 24 months is typical, with this being a point regularly negotiated.

It remains uncommon for financial sponsors to agree to widespread restrictive covenants. Still, some have shown a willingness to provide non-solicitation restrictive covenants in sale and purchase agreements in respect of key executive managers where required. The scope of such restrictive covenants is largely deal specific but usually relates to only a few, named key individuals and does not bind the full portfolio unless there is sponsor involvement in the recruitment process.