Software, media and technology businesses continued to attract investment during 2024 as artificial intelligence, cloud platforms, data analytics and digitalisation changed how services were developed and delivered.
Polestar Corporate Finance’s Software, Media & Technology 2024 Sector Review and 2025 Outlook explores M&A activity, investor appetite and valuation trends across AI and machine learning, data and analytics, digital media, e-commerce, FinTech, software, telecommunications and technology-enabled services.
Deal activity across the sector remained relatively stable between 2023 and 2024. AI and machine learning, and data and analytics, recorded increases in transaction volumes.
Private equity was involved in approximately 40% of transactions during 2024, attracted by the sector’s growth opportunities, quality of earnings and potential to generate value from the collection and use of data.
Corporate acquisitions represented approximately 30% of transactions. Consolidation continued across digital media, software and telecommunications as businesses sought to address limited organic market growth.
Venture capital accounted for the remaining 30% of funding across private equity growth-funding syndicates, although the transaction data did not include standalone venture capital investment rounds.
The Bank of England and US Federal Reserve reduced interest rates following the peaks recorded in 2023.
Although UK borrowing costs remained high, greater confidence that interest rates were no longer increasing contributed to a more positive outlook for lower and middle-market dealmaking in 2025.
European private equity activity increased by an estimated 18% year on year during 2024 following a period in which high borrowing costs had reduced deal volumes.
Deal value also increased by an estimated 13% in the US and 12% globally.
At the beginning of 2024, private equity firms held approximately 28,000 portfolio companies with a combined value of £2.5 trillion. The proportion of assets held for more than five years had increased by 18% since the end of 2022.
Exit activity subsequently increased during 2024:
Further private equity exits during 2025 were expected to release capital for reinvestment and support renewed dealmaking.
Corporate-led transactions accounted for 63% of overall UK M&A activity during 2024.
Corporate acquirers had proved more resilient during the preceding downturn in global M&A. Many companies had also accumulated cash during the period of economic uncertainty, strengthening their capacity to pursue acquisitions.
Artificial intelligence continued to develop across the software and technology sector during 2024, including products marketed as AI-enabled.
AI-supported code generation offered the potential to accelerate software development by 50%. It also supported the development of low-code and no-code platforms, making application development more accessible.
Approximately £730 billion was invested in AI coding-assistant platforms between 2023 and 2024, based on Deloitte figures included in the review.
AI-enabled software also created opportunities for businesses to:
The movement from traditional software licences to subscription-based SaaS products continued during 2024.
Subscription models can reduce initial capital expenditure while creating longer-term operating expenditure commitments. They also provide traditional service businesses with an opportunity to place their services on a platform and sell them as software products.
Cloud-based enterprise resource planning systems were increasingly used to integrate financial, human resources and operational processes, enabling more efficient analysis and reporting.
The cloud ERP market was valued at £46 billion in 2024 and was forecast to grow at a compound annual growth rate of 15.5% to 2032, according to Fortune Business Insights figures included in the review.
Blockchain technology continued to support greater data transparency, reliability and security.
Advances in the Internet of Things supported greater use of edge computing, offering:
The continued rollout of 5G was expected to support the application of new technologies. The proposed merger between Vodafone and Three was identified as a development that could assist the UK’s 5G rollout.
Technology continued to support a shift away from traditional on-site networks towards decentralised systems.
Decentralised networks can improve resilience and reduce the effect of service outages through their design.
Mergers between large production groups continued to dominate media-sector activity while acquisitions of smaller businesses slowed.
Large media companies remained under pressure to address declining linear television revenue by focusing on direct-to-consumer growth. Consolidation could also involve rationalising assets or separating individual divisions.
Global online video subscriptions were plateauing at approximately £124 billion, while advertising-supported video was growing towards £214 billion.
This encouraged video platforms to integrate advertising-funded subscription tiers.
Film and television production continued to move beyond Hollywood, supported by tax incentives, cost efficiencies and audience demand.
Cloud gaming and virtual-reality gaming platforms remained target areas for start-up investment. More established operators were also beginning to consider exits.
The UK National Payments Vision included an ambition to develop account-to-account payments as an alternative to card-based systems.
UK account-to-account transactions tripled over the preceding three years, reaching 21 million in 2024, according to FinTech Futures figures included in the review.
Account-to-account payments were expected to support:
Machine learning was also enabling more personalised financial services by helping providers:
Demand for cybersecurity solutions was expected to continue increasing, driven by:
DevSecOps was also becoming more widespread. By incorporating security from the beginning of the development lifecycle, businesses could use a more comprehensive and automated approach to reduce costs and the risk of serious security issues.
Continuous security testing was becoming a standard part of software development.
The growth of data centres increased demand for cooling systems and power-generation infrastructure.
Existing infrastructure was not keeping pace with data-centre energy requirements, creating opportunities for expansion. Liquid cooling systems were expected to represent 33% of the data-centre cooling market by 2028.
Sustainability reporting requirements also increased the need for reliable data to support company disclosures.
Technology continued to change IT operations and the role of employees within businesses.
Increased UK employment costs placed additional focus on efficiency and the adoption of technology. Businesses of all sizes needed to consider how new tools could be incorporated into their operations to remain competitive.
Agentic AI systems can plan and take action autonomously. Their development requires strong safeguards to ensure their behaviour remains aligned with the intentions of providers and users.
The United Nations designated 2025 as the International Year of Quantum Science and Technology.
Although quantum computing remained some distance from widespread business adoption, its successful development could support high-speed data processing and the creation of new algorithms.
Areas of development included:
Microsoft’s Quantum Ready Program was designed for industry leaders, with its effects expected to extend into the mid-market over time.
Project Stargate involved a proposed £400 billion investment in US AI infrastructure.
Oracle, SoftBank and OpenAI were expected to provide an initial £80 billion, with the remaining investment planned over the following years and support from UAE technology investor MGX.
The programme was expected to create opportunities for semiconductor, memory and data-centre businesses, as well as companies seeking investment to expand their operations into the US.
The EU AI Innovation Package included £3.3 billion of planned investment to 2027. Horizon Europe and Digital Europe included funding programmes dedicated to generative AI, alongside plans to strengthen the EU’s generative AI talent base and encourage public and private investment in AI start-ups and scale-ups.
DeepSeek’s release of its R1 model also affected US AI company valuations as investors assessed whether established businesses could maintain their technological advantage.
Revenue multiples across many software and technology verticals became more stable following the volatility experienced in 2022.
AI and machine learning remained an exception. Competition and uncertainty over which companies would ultimately succeed continued to produce fluctuating revenue multiples.
OpenAI was valued at approximately 33x revenue. Most tracked AI and machine-learning companies with valuations below £1 billion traded at revenue multiples of approximately 1x to 2x. A smaller number of higher-value companies traded between 10x and 15x and experienced greater investor activity.
EBITDA multiples remained relatively stable across the more mature digital media, software and telecommunications markets. FinTech multiples experienced greater volatility.
Pagaya Technologies’ TEV/EBITDA multiple fell from approximately 200x in March to 30x in May following a significant slowdown in revenue growth.
GB Group and Dave also experienced short periods in which their TEV/EBITDA multiples exceeded 150x. Dave’s multiple declined to approximately 50x during the fourth quarter before recovering to approximately 70x after the year end.
Private equity investors continued to focus on quality of earnings, with a strong preference for recurring revenue generated by SaaS products.
Investors were more hesitant about emerging areas such as quantum computing because of limited market maturity and the lack of established pricing precedents.
Strategic acquirers used software acquisitions to integrate technology assets and provide end-to-end services. Consolidation within mature verticals also enabled businesses to:
Private equity investors highlighted during 2024 included:
FXLoader provides foreign-exchange technology used within enterprise planning software. CloudCoCo provides managed IT services, while Recite Me provides a cloud-based accessibility platform for dyslexic and visually impaired web users.
Fintel completed four acquisitions during 2024:
Software Circle completed acquisitions including:
Cloudflare acquired:
IES provides building-modelling technology integrated with compliance functions.
The Glasgow-based company was acquired by Apax Partners for £105 million in June 2024, representing a reported revenue multiple of 5.5x. Scottish Enterprise made a full exit from the formerly venture-capital-backed business.
FullCircl develops a customer lifecycle intelligence platform.
The Winnersh-based company was acquired by nCino for approximately £100 million in October 2024, representing a reported revenue multiple of 10x. Nine venture capital investors made a full exit.
Invar Group develops advanced warehouse automation software.
Wincanton acquired the Milton Keynes-based company for £25 million in March 2024.
QuidMarket operates a digital direct-lending platform offering short-term instalment loans.
Propel Holdings acquired the Nottingham-based company for £55 million in November 2024, representing a reported revenue multiple of 2.5x.
ATCORE Technology develops a SaaS travel-reservation platform.
Travelsoft, backed by Capza, acquired the Slough-based company for £120 million in May 2024, representing a reported revenue multiple of 4.9x. LDC and Inflexion Private Equity made full exits.
Eckoh provides customer-engagement data security and secure-payment solutions.
Bridgepoint acquired the Hemel Hempstead-based company for £170 million in October 2024, representing a reported revenue multiple of 3.9x. The company subsequently delisted from the London Stock Exchange in January 2025.
Important areas of focus included:
AI-enabled software, automated code generation, cloud ERP, SaaS subscriptions, edge computing, 5G, decentralised networks and personalised financial services were among the principal developments.
AI and machine learning, and data and analytics, recorded increases in UK deal activity between 2023 and 2024. Overall sector transaction volumes remained relatively stable.
Software businesses can offer strong growth prospects, high-quality earnings, recurring SaaS revenue and opportunities to create value from data. Private equity was involved in approximately 40% of sector transactions during 2024.
Strategic acquirers use software transactions to obtain technology assets, integrate end-to-end services, consolidate technology systems, standardise tools and improve security and workforce efficiency.
AI and machine-learning revenue multiples remained more volatile than those in other software and technology verticals. Most tracked companies valued below £1 billion traded at approximately 1x to 2x revenue, while a smaller number traded between 10x and 15x.
Cybersecurity demand is being driven by more sophisticated cybercrime, geopolitical tensions, AI, emerging quantum technologies, interconnected supply chains and a shortage of cybersecurity skills.
Machine learning allows financial services providers to analyse spending, predict future expenses and offer personalised financial guidance, credit products, savings strategies and investment recommendations.
Large media companies are responding to declining linear television revenue and limited organic growth. Transactions can support direct-to-consumer expansion, asset rationalisation and the separation of individual divisions.
SaaS adoption, AI infrastructure, cybersecurity, energy-efficient computing, DevSecOps, agentic AI, quantum technology, data governance and further consolidation were important areas of focus.
