Significant increase in number of megadeals – Shoosmiths report

The number of venture capital megadeals (a large transaction between companies, usually involving a merger of the two or the acquisition of one by the other) in the UK has increased tenfold over the last decade, according to a report by UK law firm Shoosmiths in partnership with intuitive data platform, Beauhurst.

Ten years ago saw 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 megadeals. A striking factor of the megadeals recorded in the first half of 2021 is that more than half are 'gigadeals' – that is equity deals of £100 million or more.

Key findings of the report:

• The number of megadeals in the UK has rocketed rapidly. At the end of the first half of 2021, the number of megadeals (51) already exceeded the total amount for 2020 (44) and surpassed the previous record set in 2019 (38)

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

• 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 health tech due to the Covid-19 pandemic

• The majority of companies that have raised money by way of megadeals are located in London and the South East, though a modest proliferation of megadeals elsewhere may indicate green shoots away from the capital

• With the number of megadeals overall showing no signs of slowing, the outlook for UK venture capital investment and the underlying tech ecosystem looks extremely positive

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 £6.5bn 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 Covid-19 pandemic 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.

James Klein, Head of Technology Sector and Corporate Partner at Shoosmiths, 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 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."

About Shoosmiths

The dispute resolution and litigation practice at Shoosmiths comprises more than 130 legal advisers working across all three UK jurisdictions.

The law firm operates in 13 locations across the UK, and has 210 partners and 1400+ lawyers and business support employees.

About Beauhurst 

Beauhurst is a searchable database of the UK’s high-growth companies. It collects data on every company that meets its unique criteria of high-growth: from equity-backed start-ups to accelerator attendees, academic spinouts and fast-growing scale-ups.