Author: Mark Allen, Partner and Pete Marshall, Assistant Manager, Corporate Finance.
We are delighted to welcome you to the first of our quarterly updates covering mergers and acquisitions (M&A) activity in the UK technology sector. Given the importance of this sector to UK business (as well as the UK’s standing in a global economy), we will be testing market sentiment by highlighting the latest transactions and trends, with a particular focus on the outlook for the lower mid-market where much of the UK’s entrepreneurial activity occurs, but which is often underserved in market commentary.

This quarter, we highlight the recent stabilisation we have seen in UK technology M&A, the resurgence of PE and larger M&A and the steady return of cross-border transactions.

Market stabilisation 

The UK technology sector has not been immune to wider pressures on M&A activity over the last two years, experiencing a steady decline in the number of deals since the peak of Q4 2021. Stubborn inflation, supply chain freezes and global conflicts have combined to create tough conditions for dealmaking, while risk appetite has also been impacted by a higher cost of capital due to the elevated interest rate environment. It’s worth noting that across all sectors the volume of global M&A transactions has been more affected than the UK.

Macro-economic factors aside, technology has generally been a resilient sector, largely due to the vision and entrepreneurialism of our technology leaders. Technology businesses will always be sought after due to their importance to productivity in business and society, their high growth potential, and the pricing power they can leverage during inflationary times.

We are pleased to see that Q1 2024 saw a stabilisation in deal volumes and overall sentiment is showing signs of improvement. At £8.6 billion, total deal value has increased 28% year on year, also suggesting increased confidence in larger transactions.

UK Quarterly Tech Activity Chart 1


  • Larger M&A Returns to the Fold.
    UK technology deal activity by value is on an upward trend, and there has been a return for larger transactions in the market. We have seen a similar trend globally, with eight mega deals (over $100 billion value) in Q1 2024, two more than the previous quarter and six more than Q1 2023. This bodes well for the UK technology sector as a whole and we would expect confidence to trickle down to the mid-market and beyond.
  • The Resurgence of PE.
    PE deal levels have returned as many funds still sit on record levels of dry power. There was a 45% quarterly increase in the number of PE deals in the UK technology, media and telecom (TMT) market, with a particular trend towards secondary buy-outs (SBOs) as PEs turn to safer, larger assets. There is also pent-up demand for PE to realise current investments as they held on through the more challenging market conditions, hoping for higher valuation multiples. Investments held globally, PE investments held for more than four years made up 46% of total PE-backed businesses, the highest level since 2012.
  • Software Outperforms IT Services.
    We have seen a divergence between IT Services and Software M&A, with a marked softening in the IT Services market, particularly for the usually active PE-backed buy and builds. We suspect that some of this is due to their (typically) lower quality of earnings, with a much higher likelihood of these businesses missing revenue expectations. Interestingly, we have noted that in the first few weeks of Q2 2024, there have been significant announcements within IT Services, including the £800 million SBO of Focus Group by Hg Capital (making Focus a $ unicorn) and a reported £215 million acquisition of 4Com by Daisy Group, expected to be announced soon.


  • Acquirers continue to pay high multiples for quality businesses.
    Despite the softer market in recent years, we continue to see high demand for quality technology businesses. Acquirers are still willing to pay higher multiples as software valuations increased this quarter to an average of 19.2x EBITDA.
  • Profit remains the focus.
    The tougher interest rate environment and borrowing conditions has meant that profitability remains a key metric for buyers. Companies should focus on higher margin offerings as good levels of profitability drive premium valuations.
  • Mind the price expectation gap?
    The post-COVID-19 period of 2021-22 created a short-term bounce, resulting in inflated price expectations for several technology businesses. While the market has started to stabilise, transaction data suggests we are still recovering from this mismatch in expectations as processes have lengthened or moved to the right as buyers and sellers adjust to find a middle ground.


We expect this positive sentiment to continue during 2024, as the Bank of England forecasts further reduction to inflation with interest rates expected to follow. Elections at home and abroad can create uncertainty, but, even with a possible change of UK Government, material changes to economic trends and fiscal policy are not being anticipated. Importantly for the lower mid-market in particular, headline CGT rates are not showing signs of being targeted.

The US is an important barometer for the global technology sector and its technology shares also continue to hit all-time highs as investors place bets on its long-term future. These demand drivers give us reason for cautious optimism in 2024. The biggest risks remain the geopolitical environment and the stickiness of domestic inflation.

UK Quarterly Tech Activity Chart 2

Technology Heat Map

Below is a heat map of UK technology M&A activity, showing the key statistics in the sector and their movements on both prior year and prior quarter.

Key: Green (positive change) and Red (negative change)

Technology Heat Map Chart

Please note we have excluded all deals over £5 billion and any valuations above 50x EV/EBITDA and below 2x EV/EBITDA in this report. The average deal size excludes deals with no EV reported. 

Capital Markets

UK technology equities have underperformed relative to their US counterparts over the past 12 months, mainly because of the structural problems that persist in the UK capital markets, but also due to the focus from investors on AI, where the UK seems to have fallen behind the US. UK funds recorded their 34th consecutive month of net selling in Q1 2024.

Over the quarter as a whole, investors removed £2.1 billion from funds focusing on UK equities. We have seen several examples of quality UK technology businesses either choosing to list in the US or turning to PE as a preferred exit route as a result.

The UK has generally struggled to re-establish itself as the global hub for equities, despite the UK Government’s increasing efforts. There were 40 IPOs in the US in Q1 2024, up 18% on prior year, and none in the UK. In an interesting development, the London Stock Exchange has announced plans to launch its own private markets platform under the Private Intermittent Securities and Capital Exchange System (PISCES) legislation announced in the Autumn Budget. PISCES would allow private companies to trade their securities in a controlled environment and on an intermittent basis. We will watch this space for any impact on UK M&A activity.

UK Quarterly Tech Activity Chart 3 and 4
UK Quarterly Tech Activity Chart 5

SME Focus

The lower mid-market is traditionally a highly active area of the market with the potential for significant value creation, particularly with businesses who have developed disruptive technology or a niche expertise. It also supports PE buy and build platforms as they seek complimentary clients and capabilities.

The charts below show that the challenging M&A conditions of the past few years have had a greater impact on the lower mid-market than the broader M&A market as buyers have focused on larger, less risky acquisitions. As mentioned above, there has also been a trend in PE towards SBOs due to the relative safety of a tried and tested asset and management teams with PE backed experience.

Despite this, in Q1 2024 not only did deal volumes stabilise in the lower mid-market, but they increased by 5% on the quarter to 41 transactions. PE was the main driver behind this as the number of buy-outs more than doubled in the quarter. Deal values fell, however, by 29% against Q4 2023 to £1.1 billion.

The most active strategic acquirers of SME’s in the past few years have been Access Group, Ideagen and IRIS in Software and Babble, Marlowe and Croft in IT Services.

Key trends in the lower mid-market

  • Converging technologies and revenue synergies.
    We often see businesses in the lower mid-market, especially in IT services, look to expand their service offerings to existing customers to increase their ‘share of wallet’ e.g. traditional telecommunications businesses acquiring cloud, connectivity, and cyber assets. 
  • Large PE-backed consolidators.
    One key feature in the lower mid-market is consolidation, whether via PE platforms such as Babble and Focus, or through vertical software consolidators such as IRIS and Access group. Consolidation will continue to be a feature of the lower mid-market to expand market share, access new customers, gain intellectual property or enhance product and service offerings.
  • Increase in cross border transactions. 
    Global acquirers are looking at the UK for opportunities to acquire quality businesses to increase technology offerings or to access a customer base. We have seen such examples in the IT Consulting space as large US listed consultancy Accenture has acquired several high growth product specialists in the UK over the past few years.
UK Quarterly Tech Activity Chart 6 and 7

Sector Spotlight

Developments in AI and particularly generative AI continue to be the most talked about trend in the technology sector. Traditional AI focuses on analysing historical data and making future numerical predictions, while generative AI allows computers to produce brand-new outputs that are often indistinguishable from human-generated content.

A report by the Alan Turing Institute suggested AI could help automate around 84% of repetitive services in the UK, so it will be vital that the UK invests time and money to find commercial use cases to avoid being left behind by global counterparts. Most used cases so far, have focused on sales and operations.

Recent positive AI UK developments.

  • Microsoft is opening a new AI R&D hub in London. 
  • UK and US sign a landmark deal to work together on testing AI.
  • Microsoft plan £2.5 billion in UK generation AI datacentre infrastructure.

Crowe activity

Over the last quarter, Crowe has contributed to the following UK Technology transactions.

Q1 2024 we advised:

  • CloudClevr on its acquisition of telecoms and managed service business, Bamboo.
  • Coniston Capital on their investment into IT managed services business, Equity Networks.
  • YFM on their investment into Edtech business, psychology tools.
  • E-learning technology provider CareSkills Academy on its sale to Citation Group.
  • Passion Capital backed Tillo on its acquisition of employee experience technology business Jigsaw Business Solutions.

Case study – CloudClevr

Crowe advised CloudClevr (part of Rigby Group PLC) on its acquisition of Bamboo Technology Group, a leading communications and IT specialist based in Cheltenham, which gave CloudClevr increased geographic coverage in the west of England and brought complementary communications and IT capabilities to the group as well as significant additional scale.

As part of the vendor due diligence, we provided detailed commercial and performance analysis of the three businesses in the Bamboo Group, which ultimately resulted in the divestment of a non-core business prior to completion. Crowe’s financial due diligence services were led by Geert Struyven and David Payne while Rob Gunn and Joe Krawec also provided tax due diligence advice.

Sources for article: Pitchbook, Megabuyte, ONS, Bank of England, Calastone, Citywire

Supporting you

Our Corporate Finance team are here to assist you with every step of your M&A journey. Please contact Mark Allen or your usual Crowe contact for more information.


Contact us

Mark Allen
Mark Allen
Partner, Corporate Finance 
Thames Valley