Software, Media & Technology 2024 Sector Review & 2025 Outlook

2024 General Economic Backdrop

• A major election year – the US, UK, France etc.
• Improving borrowing conditions – Table has finally turned on interest rates – both The Bank of England & The Federal Reserve cut rates in 2024
  • BofE cut rates to 4.5% in February 2025 – down from the peak of 5.25% in August 2023
  • Fed Rate down to 4.5% in December after three cuts across the 2024 from peak of 5.5% in July 2023
• UK borrowing costs are still high – Yields on Gilts almost reached same level as in 2008 – but the outlook is positive for lower and middle market dealmaking in 2025, with market confidence high that interest rates are no longer headed up.
• Key Theme of Digitalisation – continues to disrupt all industries
  • AI-enabled SaaS – enables a new category where service is delivered as a product – e.g. SmarterDx
  • Enables B2B firms to outsource entire functions – this targets operating expenses rather than the typically smaller IT and software budgets
  • Provides opportunities to leverage unstructured data
  • Investors eager to grasp opportunities to put traditional businesses on a platform
• Different impacts of regulation affecting the sustainability sector across the globe
  • In the EU, stricter reporting guidelines were introduced this year. The Corporate Sustainability Reporting Directive (CSRD) requires large and listed companies to share information on how they monitor a wide range of ESG issues and their impact
  • In contrast, since the y/e the new US administration has issued executive orders to promote domestic fossil energy production and rolling back regulations, such as departing from the Paris Climate Agreement. However, individual states such as California and New York set the blueprint for pro-ESG regulation, pushing for more transparency from large companies. The battle between state vs. federal sustainability regulation will continue into this year

Deals across PCF’s sectors in 2024

Quarters: Q1; Q2; Q3; Q4

Axis labels: 0%, 20%, 40%, 60%, 80%, 100%

Series: Software, Technology & Media; Healthcare & Education; Business Services; Sustainability; Manufacturing & Distribution

UK Deal Activity in 2023 vs 2024

Sectors: Software, Media & Technology; Business Services; Healthcare & Education; Manufacturing & Distribution; Sustainability

Axis labels: 0, 500, 1000, 1500, 2000, 2500

Series: 2023; 2024

Source: Pitchbook, Excludes deals with a stated value of >£500m

M&A Backdrop: Trade VS. Private Equity

Private Equity: Bounce back in 2024

• Overdue improvement in Private Equity (PE) led dealmaking in 2024 – 2025. Focus will be on exiting accumulated portfolio companies to get cash back to LPs and recycled into new PE funds.
• Strong uptick in European activity – estimated 18% increase YoY after a lull in deals in recent years due to high borrowing costs.
  • Number of deals estimated to return to 2021-22 levels
• Similar trend in the US and globally – estimated 13% and 12% increase in deal value respectively – with a return to 2022 levels (not yet at 2021 peak)

Trade: Continued Corporate Dominance

• Corporate-led activity demonstrated greater resilience during the downturn in global deal making over the past two years, and accounted for 63% of UK M&A activity in 2024.
• The gap between PE and trade has however meaningfully closed over the past decade – PE has caught up from a 49% difference in share of M&A value in 2014, to accounting for 47% of M&A activity in 2024. The expected uptick in PE exits will boost firms’ confidence and appetite for new deal making in the coming decade.
• The global M&A rebound is in full swing: Recent interest-rate cuts and an uptick in buy-out activity does suggest a resurgence in both PE and Trade activity, particularly as corporate strategics maintain greater buying power impacting M&A activity in the short term.
• Recent eased recession fears amongst C-Suites also prompts acquisition confidence.

Global PE Deal Activity

Years: 2020; 2021; 2022; 2023; 2024

Deal Count axis labels: -; 5,000, 10,000, 15,000, 20,000, 25,000

Deal Value (£bn) axis labels: -, 500, 1,000, 1,500, 2,000

Series: Rest of World; North America; Europe; Global

UK PE Buyout Activity since 2020

Years: 2020; 2021; 2022; 2023; 2024

Deal Count axis labels: -, 200, 400, 600, 800, 1,000, 1,200, 1,400, 1,600, 1,800

Capital Invested (£bn) axis labels: -, 20, 40, 60, 80, 100, 120

Series: Deal Count; Capital Invested (£bn)

Source: Pitchbook, Excludes deals with a stated value of >£500m

Investor Backdrop: Key Themes

Access to Financing and Funding:

• High-interest-rate environment and recession expectations resulted in smaller growth equity transactions, with PE firms still sensitive to record-breaking rates.
• PE fundraising is a lagging indicator, and after three consecutive years of strong activity, is expected to slow in 2025 because of the disrupted cash flow cycle.
• PE dry powder by the end of July 2024 stood at £2.1tn globally – up c.4% from the start of the year.
• Corporates are cash heavy and ready to acquire
  • During the recent years of economic uncertainties, businesses have been stockpiling cash through a combination of streamlining operations and hesitancy for large spending [Kornferry]
  • Non-financial corporations in the S&P500 started last year with 56% of cash and cash equivalents, and during 2024 bolstered cash on their balance sheets to a record £2tn [JPMorgan Chase]
• Listed acquirors have also benefited from high-valuations, strengthening their financing capacity further

PE Exit Activity

• PE firms have struggled to realise an acceptable price for their assets against the combined backdrop of Covid followed by interest rate increases, with longer hold periods evident across portfolios as a result. At the start of 2024:
  • The PE sector was sat on a record 28,000 companies (according to Bain) with a collective value of £2.5tn.
  • The proportion of those assets held for more than five years was up 18% on end of 2022.
• With 10-year funds being the norm, pressure to divest demonstrate returns in order to raise follow-on funds is increasing. Fortunately, interest rates have levelled off and the trajectory looks downwards (albeit unclear to what degree and over what timeframe). Signs of more exit activity are being seen as a result. We anticipate an uptick in exit activities in 2025, with the recycled cash driving increasing funds available for reinvestment:
  • 9% YoY increase in 2024 for the global PE exit counts
  • PE exit activity consistently increased across Europe and the US – 17% YoY for US & 19% YoY for Europe

Global PE Exit Activity

Years: 2020; 2021; 2022; 2023; 2024*

Exit Count axis labels: -, 500, 1,000, 1,500, 2,000, 2,500, 3,000, 3,500, 4,000, 4,500, 5,000

Exit Value axis labels: -, 200, 400, 600, 800, 1,000, 1,200, 1,400, 1,600

Series: Deal Count; Capital Invested (£bn)

Source: Pitchbook,

*NB: Estimated final data for 2024 exit value

2024 Sector Highlights

Innovation, Collaboration & Responsibility

• Continued acceleration of AI (and AI badged) technologies across the whole space.
• Strong demand for sustainability-focused software as firms prepare for incoming reporting directives, with a trickle-down effect on smaller players
• Automated Code Generation – speeds up development by 50%
  • Helps low-code and no-code platforms which increases accessibility to building high-quality applications
  • Booming market for AI coding assistants – c.£730bn invested in these platforms from 2023 – 2024 [Deloitte]
• Continued move to cloud Enterprise Resource Planning products – these integrate monitoring of financial, HR & operational processes for efficient analysis and reporting
  • Industry valued at £46bn in 2024 & forecast to grow at a CAGR of 15.5% to 2032 [Fortune Business Insights 2025]
• Predictive Analytics – suggests preventative measures to reduce down-time

Connectivity

• Blockchain Technology:
  • Enhances data transparency, reliability and security
• Edge Computing following advancement of Internet of Things (“IoT”)
  • Provides reduced latency, enhanced privacy, and lower bandwidth usage
  • AI-Powered logistics platforms aided by interconnectivity & increased data collection
  • Rollout of 5G promotes application of new technologies – proposed merger between Vodaphone and Three will aid UK 5G rollout
• Decentralised Networks:
  • New technology drives a shift from traditional on-site networks
  • Improves resilience and minimises the impact of service outages by design

Changing Trends in Media

• Industry Consolidation
  • Mergers among large production groups dominate as acquisitions of smaller firms slows
  • Pressure on giants to address declining linear TV revenue by focusing on DTC growth
  • Consolidation may involve rationalising assets or spinning-off divisions
• Return of Ad Revenue Dominance
  • Global online video subscriptions are plateauing at £124bn, while advertising-supported video (AVOD, FAST) is growing to £214bn, leading platforms to integrate ad-funded tiers.
• Global Production Shift:
  • Moving outside of Hollywood – driven by tax incentives, cost efficiencies and audience appeal
• Gaming:
  • Cloud gaming and virtual reality gaming platforms continue to be target spaces for start-up investment, with more established operators starting to look to exit

Efficient & Personalised Payment Systems:

• UK National Payments Vision
  • Ambition to advance account-to-account (A2A) payments as a viable alternative to card systems
  • Drives cost savings & growth for businesses and enhances convenience & security for customers.
  • UK A2A Transactions have tripled over past 3 years reaching 21 million in 2024 [FintechFutures]
• Machine learning to deliver a hyper- personalised service to banking customers
  • Data is leveraged to derive real-time insights, analyse spending patterns, predict future expenses & offer tailored financial guidance
  • Customers presented with personalised credit offerings & buy-now-pay-later (BNPL) products
  • Predictive financial management recommends savings & investment strategies

2025 Key Themes

SaaS products:

• Subscriptions continue to replace licences reducing CapEx at the expense of longer term opex budgets
• Gives traditional businesses opportunity to platform their service and sell as a SaaS product

Human-Machine Synergy:

• Changes to IT Operations – human roles are changing and tools need to be incorporated into businesses of all sizes
• For UK, tax changes have increased employment costs, focusing attention on efficiency and technology opportunities to ensure companies remain competitive

Sustainability & Energy Efficient Computing:

• Data centre cooling systems and power generation
• Infrastructure is lagging behind demand for data centre energy – large opportunities for expansion
• Liquid cooling systems to account for 33% of the cooling market by 2028

Demand for cybersecurity solutions continue to increase due to:

• Cybercrime Sophistication
• Geopolitical Tensions
• AI and Emerging Quantum Tech
• Supply Chain Interdependencies
• Cyber Skills Gap

DevSpecOps:

• Incorporates security from beginning of development lifecycle – rapidly becoming more widespread
• A more comprehensive and automated approach
• Reduces costs and risk of serious issues occurring
• Continuous security testing is becoming standard

Regulations & Governance:

• Requirement for disinformation management stemming from increased AI generation of content
• Need for data to underpin new sustainability reporting regulations

2025 Focus Areas

Two exciting areas in focus:

Agnetic AI:

• Autonomous behaviour that can plan and take action – requires robust guardrails to ensure alignment with providers’ and users’ intentions

Quantum & Cybersecurity:

• UN announced 2025 as the ‘International Year of Quantum Science and Technology (IYQ)
  • Long way off integration for most companies but when successfully developed it will aid high-speed data processing and creation of new algorithms
• Large players need to assess how to adapt to be quantum- ready and manage crucial security risks
  • Microsoft ‘Quantum Ready Program’ addresses industry leaders but effects will trickle down into the midmarket
  • Hybrid Applications: integrate classical and quantum computing to solve complex problems more efficiently

2025 AI News:

Project Stargate: Trump announced £400bn investment in US AI infrastructure

• Oracle, SoftBank and OpenAI will provide initial £80bn with the remainder to be invested over the coming years, with assistance from UAE tech fund MGX
• This will benefit companies in Semiconductors & Memory and Data Centres as the US invests to enable usage of AI and will boost opportunities for players in these spaces for US investment to expand into operations into the States
• Potential for collaboration opportunities for UK players, especially from top research institutions

EU AI Innovation Package: £3.3bn planned investment until 2027

• Funding programmes such as Horizon Europe and the Digital Europe dedicated to generative AI
• Plans to strengthen EU’s genAI talent pool and encourage further public and private investments in AI start-ups and scale-ups, including through venture capital or equity support

AI Arms Race in full swing:

• DeepSeek’s successful release of its R1 model caused US AI rivals’ stocks to slump as investors scrutinised firms’, such as OpenAI, ability to maintain an innovative edge.

Public Market Overview

Even young verticals in Software & Technology have settled in comparison to the chaotic revenue multiples in 2022, with the unsurprising exception of companies within AI & Machine Learning – revenue multiples continue to fluctuate as the AI race continues to shake up valuations. AI is a congested space right now, with many companies competing to be the standout, but ultimately a lack of clarity around which will succeed. Compared to eg: 33x for OpenAI, revenue multiples for sub £1bn companies in the space are mostly hovering in the 1-2x range, with the volatility coming from a couple of higher value companies sitting between 10-15x which are seeing more investor activity.

EBITDA multiples are very steady for the mature markets of Digital Media and Software & Telecoms, with Fintech companies fluctuating more. EBITDA multiples for Fintech were skewed early in 2024 mainly due to Pagaya Technologies (Fintech, AI network) – it dropped from 200x in March to 30x in May linked to a significant slowdown in revenue growth, together with smaller impacts from GB Group (Fraud risk management) and Dave (Budgeting and personal finance tool) – both had short periods where TEV/EBITDA was above 150x. Dave dropped to c.50x for duration of Q4 (although it has recovered to c70x since the year end). It will be interesting to see how UK based Fintechs perform in 2025 – especially with the rumoured Revolut IPO.

Revenue Multiples – TEV/Revenue

Dates: Jan-02-2024; Jan-20-2024; Feb-08-2024; Feb-28-2024; Mar-18-2024; Apr-08-2024; Apr-26-2024; May-16-2024; Jun-04-2024; Jun-24-2024; Jul-12-2024; Aug-01-2024; Aug-21-2024; Sep-10-2024; Sep-30-2024; Oct-18-2024; Nov-07-2024; Nov-27-2024; Dec-17-2024

Axis labels: 0.00x, 0.50x, 1.00x, 1.50x, 2.00x, 2.50x, 3.00x

Series: Financial Accounting Software; Data & Analytics; Software and Telecoms; Digital Media; AI & Machine Learning

EBITDA – TEV/EBITDA

Dates: Jan-02-2024; Jan-20-2024; Feb-08-2024; Feb-28-2024; Mar-18-2024; Apr-08-2024; Apr-26-2024; May-16-2024; Jun-04-2024; Jun-24-2024; Jul-12-2024; Aug-01-2024; Aug-21-2024; Sep-10-2024; Sep-30-2024; Oct-18-2024; Nov-07-2024; Nov-27-2024; Dec-17-2024

Axis labels: 5.00x, 10.00x, 15.00x, 20.00x, 25.00x, 30.00x

Series: Financial Accounting Software; Software and Telecoms; Digital Media

Revenue and EBITDA mutliples for the past year

NB: Insufficient data to plot EBITDA multiples for AI & Machine Learning, Data Analytics,& E-Commerce

Source: CapIQ, PCF tracks companies with market cap. <£1bn

Private Transactions Overview

Deal activity was relatively static year on year, with similar numbers across all sectors with AI & Machine Learning and Data & Analytics showing an unsurprising uplift.

UK Deal Activity across Software, Media & Technology

Subsectors: AI & Machine Learning; Data & Analytics; Digital Media; E-Commerce; FinTech; Software, Telecommunications & Services

Deal Count axis labels: 0, 100, 200, 300, 400, 500, 600, 700, 800

Series: 2023; 2024

Source: Pitchbook, Excludes deals with a stated value of >£500m

Deal Type in Software, Media & Technology in 2024

Deal Count axis labels: 0, 500, 1000, 1500, 2000, 2500

Series: PE; Trade; VC

• Private Equity (c.40% of 2024 deals) is keen to invest in the sector due to strong growth opportunities, high quality of earnings and the opportunity to profit from the collection and use of data.
• Corporate acquisitions (c.30%) feature heavily as consolidation continues in both Digital Media and Software & Telecoms to combat the limited organic market growth
• 30% of funding from VC across PE growth funding syndicates

NB: search criteria did not include VC investment rounds

Investor Appetite

• Focus on quality of earnings with strong preference for recurring revenue streams in SaaS products
• PE (especially in UK) is hesitant to get involved with emerging spaces like Quantum Computing, space not yet mature and little pricing precedent, although with the recent buyout of US-based Qryptonic (Quantum-powered cybersecurity) by SpringOwl Asset Management this January (undisclosed amount), it will be interesting to see how this the position develops over the next 5 years
• VC exits to trade dominated in 2024:
  • Microsoft ‘Quantum Ready Program’ addresses industry leaders but effects will trickle down into the midmarket
  • Quantum-Safe Encryption: Protecting data against quantum attacks is becoming a priority for security-conscious organizations
  • Quantum Machine Learning: Experimenting with algorithms that leverage quantum computing for unparalleled speed and accuracy
  • Hybrid Applications: Building software that integrates classical and quantum computing to solve complex problems more efficiently

• Acquire software assets to integrate to provide end-to-end functions
• Consolidation in mature verticals as businesses seek to manage cost by:
  • Consolidating tech stacks
  • Standardising tools to boost workforce efficiency (reduces training & support needs)
  • Enhancing security – simplifies management and reduces vulnerabilities

Select Transactions

IES

Building modelling technology platform integrated with compliance functions

• Based in Glasgow
• Bought out by Apax Partners for £105m (5.5x Revenue)
• June 2024
• Formerly VC-Backed – Scottish Enterprise made a full exit

FullCircl

Developer of a customer lifecycle intelligence platform

• Based in Winnersh
• Acquired by nCino for c.£100m
• October 2024 (10x Revenue)
• Formerly VC-backed – nine investors made a full exit

Invar Group

Developer of advanced warehouse automation software

• Based in Milton Keynes
• Acquired by Wincanton for £25m
• March 2024

QuidMarket

Operates a digital direct lending platform which offer short-term installment loans

• Based in Nottingham
• Acquired by Propel Holdings for £55m (2.5x Revenue)
• November 2024

ATCORE Technology

Developer of a travel reservation SaaS product

• Based in Slough
• Acquired by Travelsoft (Backed by Capza) for £120m
• May 2024 (4.9x Revenue)
• LDC and Inflexion Private Equity made a full exit

Echoh

ECKOH

Provider of customer engagement data security solutions and secure payments

• Based in Hemel Hemptstead
• Bought out by Bridgepoint for £170m
• October 2024 (3.9x Revenue)
• The company delisted from the LSE in January 2025