Private equity tightens grip on UK’s brightest tech firms

Private equity’s grip on UK companies is tightening. PE- and venture capital-backed deals from British firms have reached nearly $30bn this year, according to S&P Global. PitchBook expects the ratio of PE-backed firms to listed companies in Europe to hit 2.3 to 1 by 2026, up from 1.5 to 1 in 2019. This isn’t happening in a vacuum.

PE funds have raised record dry powder and are increasingly looking downmarket at late-stage tech firms, particularly those with recurring revenue and defensible IP. ounders face a more difficult path to public markets: the UK’s listing pipeline remains thin, despite encouraging changes in the budget, and the bar for a meaningful tech IPO has risen sharply.

These concerns are well rehearsed. Charles Hall, head of research at Peel Hunt, warned in a recent report that mid-cap companies are being removed from the market at an “unprecedented scale”, with overseas bidders driving 61% of activity this year. He says the pace of takeovers reflects “capital outflows from the UK and persistently low valuations”, a combination that has left many high-quality firms exposed.

The KKR’s takeover of Spectris at £4.8bn earlier this year – a striking 96% premium – has become a shorthand for the structural weaknesses of the UK stock market, undervaluation and an environment where high-quality companies are viewed as bargains for overseas buyers. But other names – Oxford Ionics, Alphawave and Keywords Studios – confirm the trend. As takeover interest accelerates, The Observer has analysed five late-stage UK tech scale-ups that could be next:

Spin-outs don’t always translate to real-world impact, but Ultromics has. Born out of Oxford research, the team built its cardiology AI alongside clinicians who were frustrated by diagnostic errors that cost lives. Today, its tools are used across major hospital systems, as doctors say it helps them catch heart disease earlier and more accurately.

The company’s recent $55m Series C is funding a push into the US, where heart-health diagnostics is a huge market. Its strong clinical validation makes Ultromics stand out to PE firms looking for category-defining medical platforms. Not just another AI startup.

What sets Shop Circle apart is the founders’ belief that small software makers deserve a path to scale without burning out or selling too early. The company was built to give indie developers a stable home where their products could keep growing and has become one of Europe’s most active acquirers of e-commerce tools. But co-founder and CEO Luca Cartechini told The Observer the current market makes private exits more attractive than traditional listings: “It’s only natural to prefer acquisitions or private exits over IPOs in today’s European market. That’s exactly why we started Shop Circle. The threshold for a meaningful software IPO was around $100m annual recurring revenue (ARR) a decade ago; today it’s closer to $500m+, and that often isn’t enough.”

The semiconductor innovator Cambridge GaN Devices (CGD) closed a $32m Series C this year, adding momentum to the UK’s small but fast-growing chip-design ecosystem. Its energy-efficient gallium-nitride power devices supply an expanding global market. CGD is a strong fit for PE buyers seeking strategic IP and clear scaling potential.

With clients spanning major infrastructure and megaproject developers, Nodes & Links is one of the UK’s most promising applied-AI firms. Its $12m Series B, raised in February, is fuelling expansion in the US and Middle East. As governments face rising pressure to deliver public projects on time and on budget, the company’s value proposition has strengthened, and it would fit nicely in a project-delivery software portfolio.

London-based Raylo operates a device-subscription and leasing platform for phones and other tech with strong recurring revenues. With £110m-plus in past funding, its asset-backed model and consumer-to-enterprise pivot make it well-placed for acquisition as the circular-economy sector matures.

A record year for tech buyouts?

UK scale-ups are navigating an environment where the historic “dream of an IPO” is giving way to more pragmatic exits. Even with recent policy efforts and stamp duty reliefs aimed at revitalising London’s public markets, industry voices say more needs to be done. The alternative is that 2026 becomes a record year for UK tech buyouts.

Some stress the need for reforms that make it easier for firms to stay and grow in the UK. This could include strengthening research tax incentives and giving pension funds more flexibility to back late-stage tech.

Initiatives such as the British Business Bank’s LIFTS programme, designed to channel pension and institutional capital into high-growth firms, are seen as a step in the right direction. Whether those changes arrive quickly enough and at the scale required will determine if the UK can keep more of its brightest companies at home.

Photograph by Luis Alvarez/Getty Images