Despite the challenging geopolitical backdrop, 2026 has so far seen record levels of M&A activity driven by takeover activity around UK stock market-listed companies.
The feeding frenzy, fuelled mainly by overseas buyers targeting undervalued firms, has seen major names including Senior, Bodycote, Intertek and Schroders attract bids, with speculation over several more.
The deals announced to date haven’t involved any of Scotland’s dwindling tally of businesses on the main market or AIM – although Edinburgh’s Craneware continues to see speculation after its rejection of a US private equity approach last year – but according to David Beveridge of Macdonald Henderson, the same drivers behind the listed company boom are also at play among the nation’s smaller companies.
“There is something of a sea change underway in the ownership of Scottish companies in the small to mid-cap sector,” he says.
With many owner managers having endured a “tough paper round” in recent years with Covid, domestic political upheaval and now a difficult geopolitical backdrop, succession and retirement are increasingly on the agenda.
“That trend coincides with Scottish firms being seen as very attractive by overseas buyers, in particular from the US, Europe and Scandinavia,” says Beveridge.
“They are regarded as having good workforces, being well run and attractively priced compared to say businesses in the south east of England or London.”
In his experience, many of the deals currently being seen are also generally a positive outcome for the Scottish economy.
“The suitors involved are not looking to just get the assets and close the businesses down, they are buying to build,” he points out.
A key theme of UK dealmaking last year was a fall in deal volumes but increase in deal value as investors focused on fewer but higher quality targets, often taking longer to get over the line.
Alison Gilson, corporate partner at Shoosmiths Scotland, says that trend has continued into 2026.
“The deals landscape in Scotland remains steady, notwithstanding macroeconomic and geopolitical headwinds. However, buyers and investors do seem to be more selective with a focus on securing high quality assets in key sectors, and with greater scrutiny on diligence,” she says.
The suitors are not looking to just get the assets, they are buying to build
– David Beveridge
Gilson says with significant dry powder currently available, particularly from private equity players, conditions are ripe for more activity.
“It is encouraging to see that many of our clients are attracting international investors. In Scotland we have a broad range of thriving businesses that should be attractive to local and international investors and acquirers.”
Standout transactions involving Scottish firms in recent weeks include the planned acquisition by Standard Life – formerly known as Phoenix Group – of Edinburgh-headquartered Aegon UK in a £2bn deal that will create the UK’s largest retirement savings and income business with 16 million customers.
The standout fundraising deal recently was the £52m Series B round for Edinburgh legal AI business Wordsmith.ai, taking the total raised by the firm in the past two years to an eyebrow-raising £75m.
It follows a year of rapid growth for the company whose technology is now used by more than 500 companies, including BT, Financial Times, Safelite, Trip.com, and Canva. The latest round was backed by Highland Europe and Index Ventures alongside other investors.
The investment deal was announced just days after the UK Government unveiled its £500m Sovereign AI investment fund in Scotland to encourage other high-growth potential technology companies in the sector to apply for backing.
Josephine Kant, head of ventures at Sovereign AI, said Scotland was well-positioned to capitalise on its “extraordinary institutional capabilities” in areas that are driving some of the world’s most exciting developments. Although the first three investments have been in London-headquartered AI startups, Kant said there is a strong pipeline of activity in Scotland.
“Scotland already possesses world-class sovereign capability across AI, deep tech, photonics, quantum and scientific research. The next generation of globally significant AI companies can and should scale from here.
“From Glasgow’s deep technical research base to Edinburgh’s AI ecosystem and the enormous infrastructure opportunity emerging across North Lanarkshire which is home to Scotland’s first AI Growth Zone, the foundations are here for something globally significant.”
Spring Deals in Focus
University spinout secures £1m
University of Strathclyde spin-out Northern Light Microscopy secured more than £1m in pre-seed funding.
The investment, led by DSW Ventures with participation from Scottish Enterprise, SWIM Capital and the University of Strathclyde, will be used to scale production and bring the company’s first advanced imaging products to market.
Rescue deal at animation firm
Around 30 jobs were saved at multi-award-winning Wild Child Animation, the Stirling-based studio and contractor, following its sale by business turnaround specialists at accountancy firm Wbg. It was acquired by Magic Light Pictures, a BAFTA winning creator of family entertainment and producer behind Zog, a series based on a popular picture book.
Environmental data scale-up attracts £6m
Edinburgh-based Earth Blox, which helps clients use complex environmental data to make investment decisions, won £6m in new funding.
The scale-up round was led by PXN Ventures, with support from Scottish Enterprise, Archangels, and the European Space Agency. The funding will grow the team, accelerate product development, and expand the platform’s capabilities.
Recycling business snapped up
Rekk Recycling, founded in Glasgow by Steven Dodds and John Byrne, was sold to UK-wide waste management group Papilo.
The acquisition, backed by private equity firm Palatine’s Impact Fund, will see the founders remain with the business.
Private equity player acquires nursery operator
Nursery operator Pinocchio’s, which operates five sites across Edinburgh
and Midlothian, was acquired by private equity firm Foresight.
Founded in 1997 by Stratos and Lewissa Koulis, the business cares for approximately 360 children and employs over 110 staff.
Manufacturers look to M&A for growth as investors set to increase exposure
Dealmaking is a key focus for Scottish manufacturers as businesses revisit their growth plans and look to strengthen their resilience.
A poll of senior decision makers in the sector found nearly a third expect their boards to be leading buy-side or sell-side M&A over the year ahead.
Callum Carmichael, restructuring advisory partner at FRP in
Edinburgh, which carried out the survey, says the findings highlight a proactive approach among many manufacturers to use deals to tackle gaps in capability and build long-term value.
“It also shows that resilience is no longer purely defined by financial strength, it’s about the capability to make strategic investments like M&A and adapt at pace.”
Just over a fifth of investors and lenders also said they were actively looking to increase exposure to manufacturing in the next 12 months, with a similar proportion planning to lend or invest selectively.
Recent deals in the sector in Scotland have included completion of the £1.3bn acquisition of Dundee-based Smiths Interconnect Group by US-based
Molex.
BM Lubrications & Monitoring Solutions of Kilwinning, which works with manufacturers across the food and drink sector, was also bought by UK-based IntelliAM, and Ayrshire-based sheet metal manufacturer Wallace McDowall was acquired out of administration in a sale secured by advisers at Leonard Curtis.
Read more Deals & DealMakers articles by Perry Gourley here.
