The number of venture capital ‘megadeals’ in the UK has increased tenfold over the last decade.
A new report by UK law firm Shoosmiths in partnership with data platform Beauhurst details how a decade ago there were just five megadeals – where £50 million or more was invested into UK companies.
However the report reveals in the first half of 2021 alone there were 51 of these deals. Indeed, more than half of those were ‘gigadeals’ – equity deals of £100m or more.
The number of megadeals so far this year has already exceeded the total amount for 2020 (44) and surpassed the previous record, set in 2019 (38).
There has also been a record amount invested via megadeals, with £6.5 billion invested in the first half of 2021, beating the previous highest annual value of £6.2bn invested in 2019.
It is predominantly technology companies which are benefiting from these huge funding rounds. FinTech, software and life sciences businesses dominate the ranking of the company sectors by the number of megadeals.
Meanwhile, with non-financial environmental, social and governance (ESG) factors at the top of many organisations’ agendas, it is notable that companies with a sustainability offering – in particular transport tech and energy tech – are attracting significant investment, alongside HealthTech due to the COVID-19 pandemic.
The majority of megadeal companies are located in London and the South East, though a modest proliferation of megadeals elsewhere may indicate green shoots away from the capital.
James Klein, head of technology sector and corporate partner at Shoosmiths, said: “The majority of companies who have raised investment for megadeals have been in London – it is therefore important that venture capital investment activity in the UK continues to occur across all regions.
“A small proliferation of megadeals elsewhere in the UK may indicate this is starting to happen, but perhaps more action needs to be taken to raise awareness of the investment opportunities, and support available, for scaling companies outside of London.
“With the majority of fundraising deals occurring remotely in 2020, it will be interesting to see if the pandemic has challenged the notion that a presence in London is required in order to meet with – and present to – potential investors.”
Factors driving the unprecedented number and volume of megadeals include the record economic stimulus that has been employed around the world to lessen the impact of COVID and the shifting of capital towards technology sectors that fared well during the pandemic such as software.
Other factors include the increasingly large funds being raised by venture capital investors and the low returns available in public markets.
Henry Whorwood, head of research and consultancy at Beauhurst, said: “The huge number of megadeals signals not only the maturing of the UK’s startup and scaleup ecosystem but also the new types of investors that are seeing the potential of both the UK and high-growth companies. 2022 should see a staggering number of these deals as well.”