As the investment landscape matures, an increasing number of businesses are landing at a stage in which they are in need of, and indeed are able to take on, tens of millions of pounds as a single round of fundraising.
At an extreme, 62 megadeals, (deals amounting to a value of over £50 million) were pulled through and completed during this first half of 2022, a slight decrease in volume from H2 2021.
2021 was a landmark year for megadeals, as dealmakers kept and accelerated the pace from the first to the second half of the year, with the number of megadeals in 2021 H2 totaling 65.
There are several factors which drove these numbers of megadeals forward in 2021, including the record economic stimulus that was employed globally in an effort to allay the impact of the pandemic and the technology-shift which followed.
Russ Shaw CBE, founder of Tech London Advocates and Global Tech Advocates, speaks on this activity, saying “with many traditional sectors unable to pivot to the new normal of the pandemic, capital inevitably flowed to the businesses that were continuing to scale”.
Namely, tech and software.
Most strikingly, over half of the megadeals recorded in H1 2021 were gigadeals (deals reaching a value of over £100 million), reflecting the increasing size of private companies and the market for private capital.
Deals worth over £50 million, let alone deals worth more than £100 million, were comparably unheard of a decade ago.
In contrast, companies now have the ability to access increasingly large portions of private capital, allowing them to raise larger rounds and stay private for longer.
2022 has been an impressive year for megadeals so far, as the total number recorded at 62 contains a record 29 gigadeals, amounting to less than 2% of announced deals and yet contributing to an astounding 48% of pounds invested, at £7.22 billion.
The median deal size of announced equity rounds has also seen a massive increase over the past decade, an upwards trend largely led by increases in companies at the growth stage.
However, in H1 2022, the median deal size saw a 12% decrease from H2 of last year, coming down at £1.1 million.
This is a result of a 20% decrease of funds pouring into companies at the Growth stage, landing at £8.84 million, regardless of a new high reached by Venture stage rounds, achieving £1.7 million and representing a 6% increase from H2 2021, and Seed stage rounds stabilising at £500k.
From 2011 to today, both the mean and median megadeal sizes have shown a clear increase over time, a hopeful sign for more staggering market growth going forward.