Scottish activity slowing but real estate also showing ‘positive signs of recovery’
Although latest figures point to a slowing down of activity in Scotland’s deals market, there are grounds for optimism for advisers.
The £3.6bn worth of transactions recorded in the first half of the year represented a fall of 13 per cent on the previous year, but the number of larger transactions completed jumped amid a recalibration across deal types.
Data from Experian’s Market- IQ report also shows numbers of smaller deals – a key driver of M&A activity in Scotland – fell by a more modest 7.9 per cent compared to last year.
The technology sector continues to outperform the wider deals market in Scotland with recent standout transactions including Edinburgh-based legal technology start-up Wordsmith AI raising a £18.5m Series A round, led by Index Ventures. Legal firms are increasingly using Wordsmith to cut the time needed to review documents and contracts.
The round, which included participation from Scottish Enterprise, took Wordsmith’s valuation above $100m and cemented its place as one of the fastest-growing tech start-ups to emerge from Scotland’s ecosystem.
Glasgow-based legal software firm Denovo Business Intelligence, one of Scotland’s oldest technology firms, was also sold to Australian group LEAP.
Craig Goold, head of M&A at BDO in Scotland, which was lead adviser to Denovo, said in what was a relatively subdued M&A market, the Scottish tech sector has been “a real hotspot”.
“Our team advised on three tech transactions in Scotland in less than six months. What was striking was the breadth of deal types ranging from a VC fundraise, a sale to an international buyer and an MBO.”
Goold said the conditions were conducive for further high levels of activity in the sector.
“Against this backdrop and regulatory changes, M&A creates growth opportunities. Buyers continue to search for inorganic growth to drive swift value creation and diversify product offerings, innovation and geographical reach,” he pointed out.
The strong international element to Scotland’s deals market continues with 18 inbound deals in the first half of the year.
Scottish businesses also demonstrated growing confidence in overseas expansion, with outbound deal volume almost doubling to 15 transactions so far this year, including the acquisition by Edinburgh-headquartered Quorum Cyber of US-based Kivu Consulting, Weir’s deal to buy Australian mining software firm Micromine, and the purchase by Scottish distillery the Loch Lomond Group of the New York Distilling Company.
Although transitioning to employee ownership has been a growing trend for owners seeking an exit in Scotland in recent years, there has also been a rise in management buyouts this year.
David Beveridge, of Macdonald Henderson in Glasgow, who has worked on several buyout transactions including human resources consultancy HRC and financial planner Henderson Stone, believes they remain an attractive option particularly for certain types of business.
“In professional services businesses for example you often have three or four individuals pushing themselves forward and that can give you a ready-made management team for a buyout.
“An MBO also takes away a lot of the jeopardy of selling to a third-party buyer, particularly where there could be a lot of expensive due diligence involved.”
Alison Gilson, corporate partner at Shoosmiths Scotland, says her team has noted “positive signs of recovery in the real estate sector”.
“Various transactions on which we have recently advised have focused on significant property assets and have included the involvement of Scottish developers and care home operators.”
One major unknown on the horizon for the dealmaking community in Scotland is potential changes to the tax regime in the Autumn Statement. The tax rate of business asset disposal relief (BADR) is already due to be increased from 14 per cent to 18 per cent for disposals made on or after 6 April 2026.
SUMMER DEALS IN FOCUS
US PE player invests in kebab group
Glasgow-headquartered Hero Brands struck a multi-million investment deal with US based private equity (PE) firm True to support expansion of its German Doner Kebab chain.
Since launching in the UK a decade ago, GDK has expanded to over 145 UK locations and 170 globally under Hero Brands, its majority investor since 2016. Accountancy firm Wbg provided corporate finance and tax advice.
Safety technology company acquired
Reactec, developer of innovative wearable technology with data analytics, was acquired by global group Ideagen. The Edinburgh-based firm’s technology enables businesses to take a more proactive approach to the management of workplace hazards such as exposure to vibration, dust and noise.
Click here to read the recent article in the news about the multi-million pound deal.
Early investors in Reactec included Scottish investment syndicate Archangel Investors [see report on page 24 of Autumn 2025 issue of The Business magazine or click here to read the online article].
AI firm secures additional £1m
Gigged.AI, which helps companies manage workforce skills, secured £1m of additional funding including new investment from Par Equity and Scottish Enterprise.
The round also attracted high profile angel investors including former Skyscanner CFO Shane Corstorphine. The investment will support growth of Gigged.AI’s customer base in the UK and US.
Female-founded renewables company backed
Aberdeen-based ZOEX, the UK’s only female-founded wave energy company, secured £531,000 of funding including investment from Equity Gap, the University of Strathclyde and Scottish Enterprise.
The private investment by Equity Gap has been matched by Scottish Enterprise unlocking a contribution of £196,000 from Innovate UK, enabling the company, founded by Ash Penley, to scale development of its wave energy converter technology.
Plastic recycling pioneer in Series A funding
Start-up ReVentas secured Series A funding to enable the scaling of its plastic recycling technology from pilot plant to commercial operation.
The round was backed by venture capitalists, Orlen VC, Beiersdorf Venture Capital alongside Scottish Enterprise.
Livingston-based ReVentas is planning to develop a commercial plant by 2027 with further significant expansion by 2031.
‘EQUITY IS POWERFUL BUT ONLY IF YOU GET IT RIGHT’
After playing a key role in taking a technology firm from Series A funding through to a sale, former finance director John Fraser is looking to help others make the most of the potential of share option schemes to incentivise staff in fast-growth firms.
Fraser, who began his career with HMRC in Edinburgh before joining AI platform Peak, has launched equiCraft with former colleague Rachel Westwell.
The pair managed the share option schemes at Peak throughout its funding rounds and sale and are now looking to use their experience to make it easier for other businesses.
“One thing was clear: equity is powerful but only if you get it right. Too often share option schemes are confusing, badly set up or just ignored, losing their impact with employees,” explained Fraser.
Fraser said share option schemes should be a core part of the strategy of high growth firms. “Done right, they attract great people, reward loyalty and align your team with your mission. Done wrong, they create friction, confusion and can result in costly mistakes.
“A lack of knowledge regarding equity is a common challenge for startups.
Founders and executive teams often embark on the startup journey for the first time and don’t possess the experience of implementing and managing share option schemes.”
