2026 Perspectives & 2025 Review

Cavendish Technology Advisory

By Cavendish

2025 proved the resilience of the UK mid-market tech sector, with strong demand for high-quality, recurring-revenue software businesses. Looking ahead to 2026, easing macro pressure, AI adoption and well-funded buyers should support a more active and confident M&A market”

Anthony Platt
Partner and Head of Technology, M&A

As we begin 2026, we are pleased to share our outlook for the year ahead, alongside a summary of Cavendish’s 2025 Technology activity.

2025 was a year of resilience and recalibration for the UK mid-market. Inflationary pressure and a cautious interest-rate environment shaped decision-making, yet transaction activity in the technology sector remained robust, underpinned by sustained demand for high-quality investments. The market has demonstrated a renewed focus on profitability, operational efficiency and scalable recurring-revenue models.

Against this backdrop, Cavendish has continued to build momentum.

2025 Technology sector activity

1- IPO 2- Growth capital transaction 2- Debt advisory transactions 4- new public client wins 6- ECM fundraises 8 MA transactions 41 public market clients 3 - Cavendish

In 2025, our Technology team completed 21 transactions in the UK market, 10 of which were Software deals, positioning Cavendish as one of the leading mid-market advisers in the UK technology sector.

These transactions span Software, Cyber Security, IT Managed Services and IT Consulting and Media, reflecting both the breadth of our sector expertise and the market’s evolving priorities, resulting in a surge in investment interest.

Please view our 2025 highlights here

Key insights from 2025

Selective momentum in Tech Services
Tech services experienced slower overall momentum in 2025, with many businesses holding back on large-scale IT projects amid economic uncertainty. However, certain subsectors saw strong growth. Cybersecurity services continued to accelerate, driven by rising cyber threats, regulatory pressures, and compliance requirements, while specialist software implementers and IT consulting benefited from cloud migration, digital transformation, and complex system upgrades. Demand is increasingly concentrated on providers with deep expertise, as companies prefer specialist vendors over generalists for high-value projects.

Increased software M&A
Software remained the strongest driver of tech M&A in 2025, with investors favouring businesses offering scalable, recurring-revenue models and mission-critical functionality. Demand was especially high in verticals such as fleet management, CRMs, GovTech and LegalTech, are all benefiting from ongoing digitisation, regulatory pressure and the push for efficiency. Fleet and telematics solutions are seeing rapid adoption as businesses optimise operations and meet ESG goals, while CRM, public-sector and legal software continue to modernise previously manual workflows.

Private Equity influence
Private equity remained a dominant force in mid-market dealmaking throughout 2025, supported by strong dry-powder levels and renewed fundraising. With financing conditions still cautious, PE firms have increasingly favoured bolt-on acquisitions over new platforms, using buy-and-build strategies to scale existing portfolio companies with lower execution risk. Bolt-ons formed the majority of UK PE deals this year as investors sought targeted capability expansion and faster value creation. Exit activity also mildly improved after slower years, enabling funds to recycle capital into new opportunities.

2026 Outlook

As we look to the year ahead, we remain cautiously optimistic for rising deal activity. We anticipate:

Moderate rebound in mid-market tech M&A volumes: As interest rates ease and liquidity improves, alongside stabilising inflation and returning market confidence, deal volumes are expected to recover moderately over the course of 2026. Strategic acquirers and PE firms are prioritising tech assets that offer digital capabilities, operational efficiency, and AI integration, with a focus on long-term value creation and sector consolidation.
Continued focus on sub-sectors that support strategic resilience and AI-led transformation: We expect continued interest in businesses enabling automation, data analytics and cybersecurity, as well as platforms that enhance scalability and operational resilience. Companies offering embedded AI capabilities and solutions that drive efficiency across enterprise workflows will be particularly attractive.
Private Equity will continue to be a major driving force in the mid-market- including public-to-private M&A: We anticipate PE firm to continue to remain highly active. With significant dry powder and pressure to deploy capital, PE will be continuing to target resilient sectors with strong cash flow and recurring revenue models, particularly in high-growth areas like AI, cloud, and cybersecurity.

Overall, while macroeconomic uncertainty persists, the structural drivers of digital transformation and AI adoption remain strong. These dynamics support our view that M&A, capital raising and strategic investment activity will remain central to growth and innovation across the technology sector in 2026.
Cavendish remains committed to supporting our clients as the technology sector evolves. Please contact the Cavendish Technology team for further insights or to discuss opportunities in the year ahead.