How the Iran war is affecting business and M&A

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Increased uncertainty and market volatility

Geopolitical tensions linked to the conflict have contributed to instability across global markets, particularly through energy price volatility and supply chain disruption.

For lower midmarket companies, this can be especially challenging. These businesses are often more exposed to cost shocks and have less capacity to absorb prolonged uncertainty.

In M&A terms, this environment typically results in delayed processes, extended due diligence, and wider valuation gaps. Many buyers and sellers are adopting a wait-and-see approach, holding off on transactions until geopolitical developments and economic consequences become clearer.

Impact on valuations

Market conditions linked to the conflict are contributing to changes in valuations through rising input costs and operational risk.

Energy prices, logistics disruption, and supply chain uncertainty can all erode margins forSMEs. Continued disruption to key shipping routes, including the Strait of Hormuz, is increasing scrutiny from buyers, who are often seeking price reductions or enhanced deal protections.

This reinforces the UK market’s divergence between high-quality assets and the rest. While overall volumes have declined, capital continues to flow towards resilient, well-prepared businesses, often at premium valuations.

For more marginal businesses, however, valuation pressure is likely to intensify.

Opportunities for strategic acquisitions

Despite the challenges, periods of geopolitical disruption often create opportunities for well-positioned buyers:

Resilient businesses as premium targets: Companies with strong pricing power, diversified supply chains or lower energy dependency are likely to command strong interest.

Distressed or pressured sales: While challenging for many businesses, rising costs and uncertainty may push some to market at reduced valuation, creating acquisition opportunity for buyers.

Buy-and-build strategies: Private equity investors continue to pursue consolidation strategies in fragmented sectors, particularly where scale can mitigate risk.

For financially strong lower midmarket businesses, this environment may present a rare opportunity to acquire strategically valuable assets at attractive entry points.

Potential impact of de-escalation or stabilisation

Any stabilisation in the situation in the Middle East, particularly if it reduces energy volatility, could boost M&A activity.
Market data suggests that confidence is highly sensitive to macro and geopolitical conditions. While volumes declined in 2025, deal pipelines have begun to rebuild, with expectations of increased activity into 2026 as conditions stabilise.

A more stable environment could drive:

Increased investor confidence: Reduced geopolitical risk would likely narrow valuation gaps and accelerate stalled processes.
Improved valuations: Lower input costs and improved earnings visibility could support stronger pricing.
Enhanced deal flow: A release of pent-up supply, particularly from sellers who delayed transactions, could increase activity across the lower midmarket.

How BKL can help

While the conflict involving Iran has introduced uncertainty, the fundamentals of the market remain intact: strong SME activity, significant investor capital and continued strategic demand. Professional advice is critical to understanding the opportunities, managing risk and completing transactions.

BKL’s corporate finance specialists advise entrepreneurs and management teams at every stage of the business lifecycle, from M&A strategy and due diligence to valuations and exits.
Working closely with BKL’s specialists in transaction tax and commercial finance, we provide extensive guidance throughout the deal process.

For a chat about how we can help you achieve your business ambitions in uncertain times, please speak to your regular BKL contact or Daniel Shear using the form below.