Scottish private equity investment saw a strong performance in 2021, according to a new KPMG report.

Shifting to remote working and the effect of lockdowns on the adoption of digital technology provided strong investment opportunities in Telecommunications, Media & Technology (TMT), with deals in these areas increasing from 125 in 2020 to 194 in 2021.

TMT accounted for £11 billion worth of Scottish private equity investment deals, or just under 25%, last year. This was a significant increase on the £7.1bn achieved in 2020 and £9.2bn in 2019.

Scotland’s PE market in general closed 2021 in a steady position, with a record number of mid-market deals despite total investment still falling short of pre-pandemic values, according to analysis.

Despite uncertainty caused by Covid-19, both volumes and value of mid-market investments were found to have grown year on year in 2021.

Around 44 deals worth £2.1 billion were recorded in 2021; the largest number in the last five years and a 55% increase on 2020 volumes when 29 deals worth £1.7bn took place.

Commenting on the stats, Graeme Williams, director, corporate finance M&A at KPMG UK, said: “Scotland’s private equity market saw confidence return, and pent-up demand released in 2021 after an atypical 2020.

“The momentum we saw at the end of 2020 continued to gather pace into the first half of 2021, and while activity dipped slightly throughout the rest of the year, the levels maintained were still a record high.

“In the final quarter of 2021, some clouds began to gather on the horizon, with inflation, supply chain stability, fiscal-monetary policy and Covid-19 variant concerns on the minds of many, however, deals continued to get done.”

Numbers revealed that the number of PE exits in Scotland rose from 11 in 2020 to 13 in 2021, an increase on the 10 exits took place in 2019.

The value of deals in Scotland increased from £61m in 2020 to £69m in 2021. In 2019, Scottish exits totaled around £72.9m

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According to the KPMG researchers, 2022 is expected to be the year when the market returns to “full force” after back to back years of disruption for deal makers and investors.

Williams, added, “There’s no shortage of high quality Scottish businesses in sought-after sectors, such as technology or those that are tech-enabled, and those in the healthcare and life sciences sector, and this, together with the abundance of private equity money which needs to find a home, means the market should flow this year, and could surpass pre-pandemic levels.

“Investor appetite is strong and private equity funds remain eager to deploy their ample dry powder, so healthy levels of activity will continue.

“It should also be easier to diligence and value companies without so much uncertainty in the market, which in turn will make it easier for private equity houses to move forward with conviction when looking for the best investment opportunities.”

He added: “ESG will also be an important driving force that we’ll see more and more in 2022, as it becomes integrated into every area of operations, and part and parcel of what investors expect and look out for.”

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