There are reasons for optimism that M&A and VC activity will hold up in the tech sector, although tax, regulatory and economic factors could affect transactions. In the face of extreme disruption in all areas of life, the private equity (PE) and venture capital (VC) investment and merger and acquisitions (M&A) dealmaking has remained strong in the technology, media and communications (TMC) sectors. While the pandemic has had an impact on certain aspects of deals – with parties agreeing how best to allocate the new and emerging risks between themselves – transactions otherwise continued on familiar terms. Deal teams and their advisers also largely adapted to managing transaction processes effectively while working remotely. The absence of in-person interactions meant more effort and time was needed to establish the strong personal connections that drive deals and which provide the basis for collaborative negotiations in later phases. Looking at the year ahead, we see a number of emerging trends and issues:

Over the past two years, public listings have become an increasingly viable option for TMC businesses, as equity capital markets investors increasingly look to the technology and innovation sectors for growth. While Europe has lagged behind the US in this respect, the success of recent initial public offerings, such as The Hut Group in the UK, suggests that more technology businesses will look to go public in the coming year. Market sentiment will have a significant influence on whether this trend continues, and the ongoing uncertainty of the pandemic and, in the UK, Brexit may cool things again in the coming months.

PE buyers have been a familiar feature of technology M&A in recent years. The pace at which PE investors made new acquisitions fell off noticeably during the initial months of the pandemic as investors focused on stablishing their portfolios. In recent months, however, PE investors have returned to the fray and are very active again. We expect this trend to continue in 2021 as funds fulfil their mandates to deploy "dry powder".

Venture capital funds continued to invest in technology-driven businesses throughout the pandemic. During the initial phase, term sheets issued to start-ups with business models adversely affected by the pandemic – in sectors such as travel – were withdrawn and valuations of such companies suffered. As the year went on, large VC funds' closings, even larger public Covid-related investment facilities and the tailwinds of the pandemic for digital business models (particularly e-commerce businesses) supported high levels of VC activity and exits of VC-backed growth companies. In the coming year, we expect to see the number of larger, late-stage growth funding rounds in Europe continue to rise. VC funds will also drive M&A activity as they exit investments made during the wave of activity between 2010 and 2015 and return capital to their investors.