The software mergers and acquisitions (M&A) market in the UK has surged to unprecedented levels, cementing the country’s status as a significant force in the European tech investment landscape. A recent analysis from consultancy BearingPoint Capital indicates that £13.2bn was invested across 420 deals in the past year—a 27 percent year-on-year rise propelled by the continuous appetite from private equity (PE) for software and Software-as-a-Service (SaaS) opportunities.
In spite of prevailing macroeconomic challenges and widening valuation discrepancies, investor enthusiasm has demonstrated remarkable resilience, especially in sectors considered essential for future business infrastructure. Cybersecurity, vertical SaaS, and fintech SaaS have emerged as primary targets for UK investors, reflecting a strong emphasis on digital resilience, compliance, and scalable financial technologies.
The report underscores the UK’s leadership in the European software buyout arena, representing nearly one-third of all software transactions across the continent. Although the Nordic region and France have experienced quicker growth in deal activity, the UK continues to be the focal point for capital allocation, supported by extensive capital markets, a talented engineering workforce, and a well-established ecosystem that facilitates scaling and exits.
This positive momentum follows significant transactions like the acquisition of Manchester’s tech recruitment firm Venturi by multinational services company Org Group, which is part of a broader growth strategy aimed at the UK’s vibrant tech landscape.
However, beneath these impressive headline statistics, the market is undergoing a transition. Valuation disparities have widened, highlighted as a major concern by 50 percent of the PE firms queried—twice the number from the previous year. Despite this, 60 percent of funds express their intention to boost their software and SaaS investments in the upcoming year, reaffirming their confidence in the long-term returns of the sector.
In light of increasing uncertainties, acquirers are adopting a more cautious approach. Deal processes are becoming longer and more intricate, with enhanced due diligence emerging as a hallmark of the current M&A landscape. Over one-third of respondents reported increased expenditures on technical assessments, particularly concerning cybersecurity, artificial intelligence (AI), and scalable architecture, as they endeavor to differentiate substantive capabilities from hype.
AI remains a contentious issue. While interest in AI-driven companies is high, many purchasers are growing cautious, with numerous businesses expressing frustration over the challenge of distinguishing actual machine learning capabilities from exaggerated marketing claims. Consequently, specialized technology evaluations are now integral components of value creation strategies for more than half of the firms surveyed.
Cybersecurity has become an essential aspect of the M&A process as well. Standalone cyber due diligence is now emerging as a standard procedure. This shift occurs against the backdrop of a rise in cyberattacks targeting UK businesses. Recently, major retail names such as M&S, Harrods, and the Co-op have been victims of a series of data breaches, leading to heightened scrutiny from potential buyers ([City A.M. report](https://www.cityam.com/drive-for-data-has-put-a-cyber-shaped-bullseye-on-uk-firms/)).
London remains a steadfast and influential center within Europe’s broader tech market. Its strength derives from a unique blend of access to capital, concentrated talent, and a maturing exit environment. Nevertheless, increasing apprehension regarding the UK’s global competitiveness is beginning to weigh upon the sector. A recent [City A.M. article](https://www.cityam.com/london-loses-europe-tech-crown-to-paris/) indicates that the capital has recently ceded its title as Europe’s top tech hub to Paris—an unsettling change at a time of intensified international rivalry.
Just this week, London-based [Builder.ai](https://www.ft.com/content/9fdb4e2b-93ea-436d-92e5-fa76ee786caa), once a prominent artificial intelligence startup valued as a ‘unicorn’, collapsed. Earlier, the delivery platform [Deliveroo reached a £2.9bn agreement](https://www.cityam.com/deliveroo-reaches-agreement-on-2-9bn-doordash-takeover/) for a takeover by US rival Doordash, raising concerns about the scalability of tech giants in the UK public markets. Meanwhile, UK fintech star [Revolut](https://www.cityam.com/revolut-turns-to-france-after-uk-banking-headache/) has chosen Paris—not London—as its base for continental European expansion after facing a prolonged regulatory ordeal in its home market.
Technology policy expert and former government advisor Dr. Sue Black OBE has cautioned that without renewed attention, the UK risks falling behind more agile international competitors. “We need to intensify our efforts to cultivate a tech-positive culture before it’s too late,” she emphasized.
Still, there are indications of hope. The BearingPoint report showed that exit confidence among UK firms is on the rise.
