A new category of UK lower mid-market fund has emerged in recent years, focused on sectors where AI can materially improve operations and enhance revenues.

These funds describe their targets as “AI-positive” sectors. They generally avoid generalist SaaS, generic professional services, and businesses whose competitive advantage depends on work that AI can now automate. Instead, they focus on traditional industrial categories, often asset heavy, where regulation, infrastructure, or skilled workforces create real barriers to entry. In these businesses, technology enablement can create meaningful opportunities to drive growth, improve efficiency, and increase shareholder value.

Target companies are usually cash positive businesses where automation and AI implementation can have a direct impact on margins, productivity, and scalability.

Much of the capital behind these funds comes from former founders and operators who have built and run businesses themselves. Their approach often looks closer to strategic capital than traditional financial capital. We are seeing a similar preference for physical asset categories among mid-market debt providers financing acquisitions.

We wrote in August 2025 about generative AI disrupting mid-market SaaS. Funds pursuing an “AI-positive” strategy show how investors are responding to the same shift. For owners of profitable lower mid-market industrial services businesses with enterprise values between £10 million and £50 million, the buyer universe has expanded significantly. Business owners considering an exit should reflect this shift when mapping their shortlist of potential acquirers.

#AI #PrivateEquity #CorporateFinance