PE backed ‘Buy and Build’ acquirers drive 2021 deal making to record volumes
2021 was a bumper year for UK Tech M&A according to tech-focused investment bank ICON Corporate Finance.
Unprecedented deal activity shows a record 1,070 deals announced, generating an extraordinary 44% increase in deals over 2020. In its UK Technology M&A Snapshot report published today, ICON reveals:
- Year on-Year growth was 44%, over a Covid impacted 2020. This was a huge increase of 20% on 2019, which was itself a record year.
- Q1 2021 was the best quarter ever, with 291 deals.
- Valuations continued to soar with some disruptive SaaS software companies achieving over 10x revenue and overall valuations of 23x EBIT.
- There were 507 PE/VC backed ‘Buy and Build’ tech deals, tripling volume by number in a single year. This accounted for close to 50% of all activity, becoming 2021’s biggest story; investors, starved of returns, injected a wave of cash into PE as the zerointerest environment continued.
- Crossborder deals also remained a strong driver of the tech UK M&A market; continued interest from overseas buyers saw deal volumes rise to almost 50% of all transactions, a significant increase from six years ago when international transactions accounted for just a third all deals.
Brian Parker, head of M&A at ICON, said: “To say 2021 was a record year for UK Tech M&A is clearly an understatement – we had to check the figures as the year’s frenzied deal making, increased volumes and valuations were eye-watering. There’s no doubt the market is extraordinarily resilient, which means that now is a great time to be an owner of a UK Tech company looking at exit options.”
Buyers in 2021 had a keen focus on the SME sector, with an increase in smaller deals compared to 2020. As buyer appetite has increasingly turned to disruptive tech, younger, higher growth, higher risk options like Nutmeg, BluJay, Depop and WaveOptics have become ever more valuable.
For larger deals, acquirers were mostly from the USA, pushing some valuation multiples to EV/revenue of >10x.
Amongst acquirers, Babble Cloud was the most active ‘Buy and Build’ consolidator as it continued to expand its regional geographic footprint in the UK. The top five VC/PE backers supported 50 UK tech M&A deals with Inflexion, HgCapital, Blackrock and August Equity each closing 10, reflecting new tactics to deploy funds over a higher number of smaller number of deals, rather than chase the biggest and highest priced.
Summing up Brian Parker, head of M&A at ICON, added: “In brief, deal activity is unprecedented, and we see no signs of this slowing down, after a fast start to 2022 – The Year of The Tiger.”