Current and future tech deal trends

25th July 2022

Dealmaking in the technology sector has continued at a frenetic pace, both in terms of volume and value. This is reflected in our own experience at HCR – ranked number one in the country in Experian’s M&A rankings for deals by volume, we have seen a strong deal pipeline, even during uncertain times.

Insight into recent activity

2021 was a record-breaking year, with most sectors rebounding after limitations arising from multiple lockdowns and wider knock-on effects resulting from the pandemic. Start-ups in Wales raised £39m in 2021, with 13+ venture capital rounds taking place in Cardiff alone last year.

The demand for technological advancements has led to an increase in M&A in the space and in both early and late-stage funding. We see this trend continuing in the short to medium-term.

However, the current outlook for the long-term is harder to predict, with skills shortages, rising inflation and the perilous nature of global politics. That said, tech is often the one sector that can react quickly to such disruption, engineer solutions and exploit opportunities wherever they may be found.

Looking ahead – what can we expect?

Wales’ tech sector is known to be vibrant and growing – Cardiff is among the top 10 UK cities for tech investment in 2022, with £7.4m already raised according to Dealroom and the Digital Economy Council.

Cardiff is also home to one futurecorn, a high-growth tech company predicted to be worth $1bn in valuation in the next few years, which would give it unicorn status – fintech platform Sonovate, which provides finance and tech solutions to recruitment agencies and other businesses to engage contractors and freelancers. Bear in mind that other unicorns (Ocado, Betfair, Admiral) are now household names.

We expect to see the strong investor interest in technology companies continuing into 2022 and beyond – of particular interest will be those tech businesses specialising in supply chain processes, particularly those able to capture data and analytics.

Digital transformation of operations is likely to continue to be a focus and a key driver of deals across all sectors – there is high demand for digital skills across all sectors too.

Private equity (PE) and venture capital (VC) funds continue to drive the tech space forwards and are casting their nets wider too. The Development Bank of Wales continues to lead the charge locally on early-stage and follow-on investments. However, with South Wales firmly establishing itself as a major regional hub for tech businesses, we see increasing signs of interest from VCs from across the UK and internationally.

There is no doubt that Wales’ importance in the tech sector is growing – as tech companies grow here, their employees will create the start-ups of the future, creating a broader base and a stable deals ecosystem.

To support that ecosystem, we shall shortly be rolling out our HCR Horizon series, where we shall be speaking to key individuals in the local tech space to share their insights and guidance. These insights will be invaluable for each stage of the journey, from those starting off on their journey in the market, through to those looking at follow on investment and ultimately to those looking to exit.