Private Equity Report

30 June 2021


Private Equity Report

With Q1 well and truly over and out, we can reflect on the moves the PE market has made at the start of 2021 and what is to come in the following months of the year. As expected Technology and Healthcare sectors - the sectors where most emphasis was placed during the pandemic - hit quarterly volume highs. The fundraising market in the UK and Ireland has had its own K shaped recovery over Q1, with large and experienced managers reaping an increased LP wallet share, while smaller managers struggle significantly. This is said to look up in 2021 as global mobility accelerates, LP risk appetite rises and the EU and UK draw to a financial services agreement. UK and Ireland VC deal value is on the rise and looking to surpass the current annual record, while exit value has reached a new landmark figure. Finally, startups are continuing to secure US investment and deals despite the uncertain climate, and fundraising has had a solid start to the year. 


In Q1 there were an estimated 804 transactions worth £57.9 billion closed in aggregate, this denoted a YoY increase of 132.3% and 70% respectively. The last time values reached this high were in Q4 2020 and Q3 2017. The UK’s fiscal monetary package - coupled with UK’s leading inoculation programme and the avoidance of a no-deal Brexit - saw PE deal activity accelerated and improved dealmaker visibility into future company earnings. The result of this being the UK’s economy is predicted to grow roughly 7.25% in 2021, with things going well for cyclical PE-backed assets. Looking to the future, UK PE deal activity is said to continue to grow for the remainder of 2021. Why is this? Consumer spending has already risen above pre-pandemic levels with consumer confidence hitting its highest level in nearly 12 months. This increased desire to visit retail stores, use public transport and book restaurants and staycations suggest dealmakers will happily deploy capital across a functioning UK and Ireland economy. 

Due to many post-Brexit changes playing out on a PE arena, the UK poses unique risks to GPs. The UK’s financial services sector has yet to sign a deal with the EU, resulting in a hard Brexit for this industry and added complexities such as due diligence, structuring and negotiation activities will persist. Then the National Security and Investment Bill - which blocks cross-border takeovers of UK companies in 17 different industries - will affect deal dynamics for foreign-based acquirers of UK assets. 

The Tech Sector: 

In Q1, 2021, we saw 123 transactions closed, marking a YoY increase of 55.7%. We must note that most of the quarter’s activity arose from the software subsector, which accounted for roughly 60% of total deal volume. Attracting international tech talent in Q1 was made significantly easier thanks to the fast-track technology visa scheme and other UK government initiatives, such as the £500 million Future Fund, are increasing sponsors' desires to invest in this sector. This sector will see increased growth thanks to the conservative government focusing on areas like AI, data science, and clean energy, thus reigniting the UK’s global competitiveness in the technology sector. 

The Healthcare Sector: 

40 deals were closed in the healthcare sector in Q1 2021, reaching a quarterly deal volume high and a YoY increase of 14.3%. This largest healthcare deal this quarter saw was Waterland Private Equity Investments and Medical Properties Trust acquiring UK-based behavioural care center operator Priory Group for £1.1 billion. This is interesting to see as due to lockdown across the UK and Ireland, there has been an increased focus on the adverse impacts on mental health. Couple this with governments withdrawing funding in mental healthcare sectors over the past decade and sponsors see interesting opportunities to meet the demand this pandemic has created. 


Public listings exit value hit its highest quarterly number in over a decade in 2021. Ten public listings worth £9.7 billion in aggregate closed in Q1, marking YoY increases of 3.3x and 8.5x. We’ve seen more sponsors exiting through IPOs and SPACs due to the region’s excess liquidity theme with IPO and SPAC activity being sustained for the remainder of the year. Hoping the UKeconomy will have no restrictions by H2 2021, the hardest hit sectors (Oil, leisure and energy) will see a strong revival throughout 2021. Some of the top exits of Q1 include; Paysafe Group, Dr. Martens and PA Consulting,  


Only 11 PE funds closed, worth £14.8 billion in aggregate. Q1’s capital raised was driven mainly by the £10.5 billion closing of Apax X. There is room, however, for new ideas and strategies in private equity and it is a perfect time to come into the market with a new and innovative idea to spark fundraising for smaller managers who struggled throughout Q1. 

Until a memorandum of understanding (MoU) is signed between the EU and UK regarding a regulatory framework for financial services, UK PE funds aren’t a part of the Alternative Investment Fund Managers Directive. On top of this, marketing, compliance, portfolio and risk management for these funds has become increasingly complex, expensive and time consuming. 


At the start of Q1, UK and Ireland VC deal activity had £5.2 billion invested across 503 deals. At its current pace, we are on track to surpass last year’s record deal value levels. UK and Irish based startups are still getting a considerable amount of investment. They are home to some of the most valuable startups in Europe so it’s no surprise that these startups closed outside rounds and displayed strong growth rates. During Q1, the proportion of deal value from late-stage deals rose to 79.5%, which if maintained will be the largest proportion in the past decade. As these multi billion-pound companies continue to emerge, new records will be set with increased frequency. 

Financial Services Sector: 

Brexit and COVID have of course increased uncertainty in global exports, however, the Uks fintech market is still thriving with companies like closing a £215.5 million round. 

Pharma and Biotech Sector: 

While the software sector has seen thriving VC deal value figures in Q1, investment into pharma and biotech companies in the last 12 months has been sizable and saw £928.1 million invested compared to £1.6 billion in 2020. 

Investment from the US: 

Us investors have still continued to heavily invest in UK and Ireland startups, despite travel restrictions across the board. Investing stats state that roughly 25% of all VC deals in the region involved a US investor. As well as this investing, a lot of US-based investors are also drawn to scaling and bringing businesses to the US market after they have established themselves within— and penetrated—European markets. As an example, challenger banks Revolut and Monzo both launched in the US in recent years.


In Q1 2021 alone, exit value generated in the UK & Ireland reached a record £10.9 billion—far surpassing 2020’s annual total. A lack of exits, paired with pent-up investor demand, amenable equity markets, and higher public equity valuations in 2020 made suitable conditions for VC-backed companies looking to exit. Consequently, many startups pushed ahead with exits but we predict these conditions will slow in the coming months as vaccination rates increase and in-person interactions resume rapidly. 


Despite numerous set-backs, VC fundraising in Q1 in the UK and Ireland got off to a good start, with £707.1 million raised across nine vehicles. It is expected that fundraising levels will pick up throughout the year as there is a strong appetite from a diverse set of LPs that committed to VC in the past two years. 

The private equity sector is looking up in 2021 and it will be interesting to see the year unfold. If you’re interested in finding out more about private equity in Q1 and what more is to come in 2021, download this great report from PitchBook here, where we gathered this data to share with you! 

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