The majority of mid-market venture capitalists expect the volume and value of their transactions to increase or at least stay the same during 2005. But according to the latest survey carried out by Grant Thornton Corporate Finance, few sectors will reap the awards.

"With record fundraising on AIM during the third quarter of 2004, and UK M&A deal volumes at their highest level since 2000, the market is looking in good shape," said Mat Bhagrath, a partner at Grant Thornton. "The current spate of successful exits will prove a positive driver in generating further mid-market activity, and consequentially we expect to see a good number of private equity investors hungry for new deals in the coming months."

According to the survey's respondents, the projected upbeat deal flow is likely to centre on business services, healthcare and financial services. Few VCs expect to see improving investment levels in retail, extractive industries or construction.

"Business services has long been a hotspot for investors," Bhagrath said. "Likewise, healthcare continues to attract a high level of interest, and with recent new entrants to the UK market and continued consolidation, I would expect to see further activity in the next couple of years."

According to the survey's results, interest in the healthcare sector is dominated by two sub-sectors: care homes and the manufacturing of medical devices. The former is an increasingly sought after investment, according to Bhagrath, with 3i's recent sale of its investment in care home operator Westminster Health Care and the Blackstone Group's acquisition of NHP examples of continuing focus on the market. The downside, Bhagrath added, is that valuations are high enough to mean private equity investors will struggle to buy into the sector without a platform investment.