Push to raise Scottish awareness as venture capital 'megadeals' grow tenfold

Venture capital “megadeals” in the UK have increased tenfold over the last decade, a new study has revealed.

Ten years ago there were just five such deals - where £50 million or more was invested into UK companies.

However the report, released by UK law firm Shoosmiths in partnership with data platform Beauhurst, reveals that in the first half of 2021 there were 51 megadeals. More than half were so-called “gigadeals” - equity deals of £100m or more.

The 51 megadeals in the first half already exceeds the total amount for 2020 (44) and surpasses 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 via 38 deals in 2019. Picture: Jon Savage

Where megadeal investments are concerned, it is predominantly technology companies that are benefiting. UK financial technology, software and life sciences businesses dominate the ranking of the company sectors by the number of megadeals.

The majority of companies that have raised money by way of megadeals are located in London and the south east of England, though a “modest proliferation” of megadeals elsewhere may indicate green shoots away from the UK capital, the study noted.

The report also touches on investment trends, revealing that 2021 is likely to be a landmark year for venture capital megadeals. 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 via 38 deals in 2019.

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 the pandemic, as well as the shifting of capital towards tech sectors that fared well during the Covid crisis such as software.

James Klein, head of technology sector and corporate partner at Shoosmiths, which has offices in Edinburgh and Glasgow, said: “There is now no doubt 2021 will be a landmark year for both the volume of, and the value raised via, megadeals and we’re seeing that translate in the deals we are advising on here at Shoosmiths.

“What we learn from the report is that 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.”

Henry Whorwood, head of research and consultancy at Beauhurst, added: "The huge number of megadeals signals not only the maturing of the UK’s start-up and scale-up 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.”

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