Private equity for UK scale-ups: a practical guide

Most founders treat private equity (PE) like a cash event. The smarter ones treat it like a positioning event.

If you’re building a UK scale-up in the Climate Change & Net Zero Transition space—renewables, low-carbon logistics, circular economy, energy software, green construction—raising private equity doesn’t just expand your balance sheet. It can change how partners, customers, and talent perceive you. PE backing signals “this business is built to last,” which matters when you’re selling multi-year contracts, bidding for public-sector work, or persuading enterprise buyers to switch to a cleaner solution.

The catch: private equity is not friendly money. It’s structured, time-bound, and designed for an exit. If you go in thinking it’s only about valuation, you’ll miss what actually makes a PE deal work—and you’ll likely choose the wrong partner.

Private equity (PE) in the UK: what it is and what it expects

Private equity is straightforward: a PE firm raises capital from institutional investors (pension funds, sovereign wealth funds and others) and invests it into privately owned businesses, typically taking a significant—often majority—stake. The management team usually keeps meaningful equity and continues to run day-to-day operations with strategic oversight and governance from the PE sponsor.

A sentence you should keep repeating internally is this:

Private equity isn’t buying your history; it’s buying a plan to grow value and exit in 3–7 years.

That exit window shapes everything—your reporting cadence, hiring plan, acquisition appetite, and marketing priorities.

Why PE is especially relevant for net zero and climate businesses

Climate and net-zero businesses often hit a specific scaling wall:

• You’ve proved demand, but delivery requires capital (hardware, installation teams, inventory, compliance)
• Sales cycles are long (enterprise, utilities, public sector)
• You need credibility to win framework agreements and multi-site rollouts
• You may want a “buy-and-build” path (acquiring installers, service providers, or regional competitors)

PE is structurally suited to this phase because it funds scale, professionalisation, and acquisitions—without the regulatory overhead of listing on public markets.

The 2025–2026 PE reality in the UK (and what it means for founders)

Market context affects how deals get done, not whether they happen.

According to KPMG commentary referenced in the source article, UK private equity momentum softened in the first half of 2025, with economic uncertainty and geopolitics making deals slower to complete. At the same time, investor appetite remained stronger in sectors like business services, healthcare, and technology.

For climate and net zero founders, that translates into a practical stance:

• Expect longer diligence and more scrutiny on margins, unit economics, and working capital
• Expect “proof, not promise” on customer retention, payback periods, and delivery capacity
• Still expect interest if you can show repeatable growth and defensible differentiation

The source article also cites a striking figure: as of end-2024 there was £190 trillion in “dry powder” from UK-based private capital funds. Whether or not every pound is truly deployable into UK mid-market deals, the underlying point holds—there is a lot of capital chasing credible growth stories.

The hidden risk: leverage and ‘growth at any cost’ pressure

When PE competition drives up prices, some investors try to protect returns by using more debt (leverage). That can be fine in stable, cash-generative businesses. It can be dangerous in climate markets where policy shifts, supply chain shocks, and project timing can swing cash flow.

Founder rule of thumb: if your growth plan depends on policy-driven demand or lumpy projects, be conservative about leverage. Don’t let financing structure become the reason you miss your net-zero opportunity.

Are you actually a good PE candidate? A founder’s checklist

PE firms don’t back “nice businesses.” They back businesses where there’s a clear path to value creation.

You’re typically a fit for private equity if most of these are true:

1. Strong recent performance (revenue quality matters as much as revenue size)
2. Clear 3–5 year value creation plan: geographic expansion, product expansion, acquisitions, margin improvement
3. Defensible differentiation: technical edge, exclusive supply access, strong brand trust, regulatory approvals
4. Management depth beyond the founder (or a realistic plan to build it fast)
5. A credible exit narrative: strategic buyer, secondary buyout, or eventual public listing

In the net zero transition, “defensible differentiation” often comes from:

• Measurement and verification (credible carbon accounting, energy performance data)
• Operational capability (installations at scale, uptime guarantees)
• Procurement-ready compliance (PAS, ISO, cyber, safety, public-sector readiness)

Those elements aren’t just operational—they’re marketing assets. They make growth claims believable.

The PE process: what happens, what takes time, and what breaks deals

A well-run PE raise looks linear on paper. In reality, it’s a sequence of credibility tests.

Step 1: Narrative and numbers (your investment story)

Your “equity story” needs to connect three things:

• Market tailwinds (why the net zero transition makes your category inevitable)
• Your wedge (why you win versus incumbents and VC-backed rivals)
• Repeatable economics (how growth converts to cash over time)

If you can’t explain growth in one line, you’re not ready:

“We help multi-site operators cut energy costs by X% within Y months, with payback under Z months, verified by independent measurement.”

Step 2: Shortlisting investors (fit beats fame)

The source article highlights a core truth from multiple founders: chemistry and alignment matter as much as valuation. You’ll be working with the investment team for years, often through stressful moments.

Shortlist based on:

• Sector experience (climate tech, energy services, industrial decarbonisation)
• Style (hands-on vs light-touch governance)
• Appetite for acquisitions (if your plan is buy-and-build)
• Approach to leverage and risk
• Reputation with management teams (ask founders they’ve backed)

Step 3: Due diligence (the “trust audit”)

Diligence isn’t just financial. Expect deep questions on:

• Customer concentration and retention
• Delivery capacity (can you fulfil what sales promises?)
• Unit economics by channel
• Regulatory exposure and compliance
• Cyber security and data integrity (increasingly important in energy software)

My view: diligence is also brand due diligence. If your marketing overclaims—or your case studies don’t hold up—investors will assume the rest of the business is similarly “optimistic.”

Step 4: Deal terms (where founders give away value accidentally)

Valuation gets the headlines, but terms define your real outcome:

• Board composition and reserved matters
• Management incentive plan (how equity rolls and vests)
• Leverage levels and covenants
• Ratchets/earn-outs (can be fair, can be punitive)
• Growth budget commitments (especially for marketing and hiring)

Founders often under-negotiate the operating model: reporting, KPI definitions, decision rights, and how quickly capital can be deployed for marketing and growth experiments.

The marketing upside of PE: credibility, distribution, and category leadership

This is where the Startup Marketing UK angle matters.

A PE round can materially improve go-to-market performance, but only if you plan for it.

1) Credibility that shortens sales cycles

In climate and net zero markets, buyers fear implementation risk. PE backing can reduce perceived risk in three ways:

• Stronger governance and reporting
• Capacity to fund delivery (inventory, hiring, project financing support)
• Better resilience through shocks

That credibility isn’t automatic. You need to translate it into proof points:

• Updated enterprise-ready security and compliance pages
• Procurement packs and tender-friendly collateral
• Case studies with hard numbers (energy saved, emissions reduced, payback periods)

2) Budget stability for brand building

Many climate startups underinvest in brand because revenue is reinvested into delivery. PE can stabilise marketing budgets so you can invest in:

• Category education (what buyers misunderstand)
• Thought leadership (policy changes, best practice, standards)
• Partner marketing (installers, OEMs, integrators)

The goal is simple: become the “safe choice” without becoming the “boring choice.”

3) Buy-and-build creates instant distribution

The article’s examples include PE supporting expansion and acquisition strategies. In climate sectors, acquisitions can quickly add:

• Regional coverage (critical for heat pumps, solar, EV charging, retrofit)
• Certifications and frameworks
• Customer bases you can cross-sell into

But integration is where brands go to die. If you do buy-and-build, align early on:

• Brand architecture (one brand vs house of brands)
• Messaging consistency (especially around sustainability claims)
• Customer communication and service standards

Lessons from UK PE-backed growth stories (and how to apply them)

The source includes several instructive founder perspectives. Here’s what’s reusable for a climate and net zero scale-up.

Innovate: values alignment first, price second

Innovate’s chairman describes building trust through early conversations about strategy, values, and team—before getting stuck into valuation. That approach is underrated.

For net zero businesses, values alignment isn’t fluff. It affects:

• How sustainability impact is measured and reported
• Whether the investor supports longer payback projects
• How aggressively growth targets are pushed versus delivery quality

If you’re an impact-led company, choose a PE partner that won’t treat impact as a slide deck.

ZyroFisher: non-financial resources matter

The ZyroFisher CEO points out the real value in PE can be “contacts, how-to-help and a platform,” not only money.

In climate markets, that non-financial value could be:

• Introductions to enterprise buyers and channel partners
• Experience building multi-country operations
• Help recruiting senior commercial and operational leaders

David Phillips: professionalise earlier than you feel ready

The David Phillips CEO highlights investing in systems, processes, and professional management—sometimes wishing they’d invested in tech earlier.

Climate businesses scaling delivery-heavy models (installations, maintenance, logistics) should take that as a warning: growth exposes process weakness fast. Don’t wait until customer experience cracks to invest in systems.

A practical ‘PE readiness’ plan for Q1–Q2 2026

If you’re aiming to start a process this year, here’s a pragmatic sequence.

1. Build a KPI pack you’d be happy to show a sceptic

   • Revenue by cohort
   • Gross margin by product/service line
   • CAC payback (if applicable)
   • Pipeline conversion and sales cycle length
   • Delivery KPIs (on-time install, uptime, NPS, churn)

2. Tighten your sustainability and net zero claims

   • Define what you measure, how often, and who verifies it
   • Avoid vague claims like “carbon neutral” without methodology

3. Choose your adviser team early

   • Corporate finance adviser for process management
   • Lawyer experienced in PE terms
   • Finance leader who can run diligence without pausing the business

4. Decide what you want PE to change

   • Expansion into regions?
   • Acquisition engine?
   • Product roadmap acceleration?
   • Brand repositioning for enterprise?

If you can’t answer “what will be different in 12 months because of this round?”, you’re not ready to dilute.

The decision founders avoid: control vs speed (and why net zero changes the maths)

Private equity means sharing control. That’s the deal.

But in the Climate Change & Net Zero Transition, speed matters because markets are being reshaped by regulation, infrastructure buildout, and procurement changes. If your category is consolidating, waiting too long can be more expensive than dilution.

A good PE partner doesn’t just fund growth. They help you earn the right to lead a category.

Where do you want to be by 2029: a solid regional player, or the company buyers name first when they think “net zero implementation”? Your funding strategy will quietly decide that outcome.