Tech companies dominate deal flow in the South East
Over 85% of high growth companies involved in M&A fall into one or more technology-related sectors.
Percentage of high growth tech-related M&A deal activity (H1 2024)
When broken down by subsector, application software saw the most acquisitions in 2024, representing a quarter (25.2%) of total technology deals, followed by technology consultancy and IT and telecommunications support, which represented 17.5% in 2024; a huge leap from 6.7% in 2023. Payment processing and data centre subsectors also experienced M&A activity after receiving none last year.
The fact that application software, technology consultancy and IT and telecommunications support subsectors are attractive in 2024 shows a continuation of investors looking for AI applicability and recurring revenue business models.
"The UK’s AI sector is one of the most exciting in the world and it currently exists in a very light-touch regulatory framework. Most AI businesses are located in the South East and making the most of their closeness to London and the flexibility that regional premises and staff offer. The new government has said repeatedly that it’s going to invest in and grow the UK’s AI sector which will bring revolutionary changes to all sectors of the economy, not just the technology sector, but clearly it is the technology sector that is seeing and will continue to see lots of M&A activity and investment opportunities due to the rapid advancements of AI."
Matthew Holman, Partner, Technology
The UK’s tech sector is buzzing with activity. The rise in data centre M&A activity is likely driven by the growth of infrastructure-as-a-service providers, as more industries adopt outsourced IT services and cloud data storage. The new government emphasises that lifting planning restrictions for data centres is key for AI growth. Labour has stated, “We will ensure our industrial strategy supports the development of the AI sector by removing planning barriers to new data centres”. The tech-subsector is ripe with opportunities.
"The AI sector cannot achieve its potential without the right infrastructure in place to support it. In the coming 18 months we should expect to see the expansion of existing UK data centre capacity, as well as brand new data centres with exciting new capabilities."
Matthew Holman, Partner, Technology
The South East is aligning with London on technology acquisitions
The South East is arguably becoming an alternative destination to London for technology companies. The South East is following London’s lead on technology after being on par with the rest of the UK in 2021, 2022 and 2023. This is strengthened by technology companies making up a higher percentage of total deals in the South East than they did in London.