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Looking for the exit

Emerging Growth Insights and the Fast 50

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Emerging Growth Insights and the Fast 50

For many entrepreneurs, a successful exit is a key milestone near the end of a race that may have taken years or even decades. This is particularly true for those backed by external investors, for whom the exit is a critical juncture to realise returns. Exits unlock liquidity, enabling investors to reinvest in new opportunities. Even in a more challenging liquidity environment, both in the exit market and the broader equity investment landscape—the drive for exits remains strong.

Business leaders continue to express optimism about securing exits or raising additional funds. In our CEO survey, 55.4% confirmed they plan to exit their business, with 55.9% of those aiming to complete the process within the next three years. Additionally, 56.6% of respondents seek to raise capital within the next one to three years to support further growth—some as part of a stepping stone to a larger exit than could be achieved organically.

So, why does reaching an exit often feel akin to a marathon runner  summoning their final reserves to cross the finish line? The answer lies in the shifting dynamics of lending, funding, and exit markets over the last few years. During the pandemic, stimulus measures spurred a surge in exits, with 575 high‑growth tech companies cashing out in 2021 alone. The rapid expansion of the digital economy, driven by new remote working norms, created a wealth of opportunities for those well‑positioned to capitalise.

However, the post‑pandemic economic landscape has had far more hurdles for leaders and business owners. Inflation, fuelled by geopolitical uncertainty and the fallout from pandemic stimulus policies, has triggered a series of interest rate hikes by the Bank of England. These higher rates, combined with the end of quantitative easing, have significantly curtailed liquidity and dampened the risk appetite of equity investors and would‑be acquirers. The result is much tougher capital and exit markets in the UK, where owners must now navigate unpredictable conditions marked by elevated caution and a need to time their moves more carefully.

Why should the decline in exits concern the broader business ecosystem? Successful exits do not just reward founders and early investors; they fuel the entire entrepreneurial ecosystem. When early investors realise returns, they are more likely to reinvest that capital into new ventures, driving innovation and growth. Similarly, founders of exited companies can pursue new ventures or use their newly gained wealth to become angel investors, helping to support the next generation of entrepreneurs. In this way, exits play a critical role in recycling capital and talent, ensuring the continued dynamism of the ecosystem.

Online bank Zopa is one Fast 50 company that has made the best of these challenging conditions. Cautious underwriting during the pandemic meant that Zopa had lower credit losses, reducing its loan loss provisions and helping on its journey to profitability. The company now has aresilient book capable of withstanding future shocks which will help it maintain profitability.1

"There is only one tried and tested way to ensure an M&A exit process moves forward: good preparation and good advisers."

 

Kiren Asad, Partner, Deloitte

The relationship between pre-money valuation, interest rates and inflation (2014-2024)

Exits by high-growth tech companies (2019 - H1 2024)

Survival rate of high-growth tech companies in the UK

Largest known exits in 2024

Despite the difficult economic conditions witnessed in the past several years, there are signs that we are rounding the bend. The Bank of England lowered interest rates in August for the first time since 2020, with further interest rate drops expected as inflation moves closer to target levels. Reducing the cost of capital for investors and acquirers will help return liquidity to the UK’s capital markets. Investment into high‑growth tech companies in H1 2024 is 16.4% higher than the same period last year. There have already been as many high‑growth company IPOs in 2024 as there were in the whole of 2023. AI platform Rezolve is the latest high‑growth technology company to undergo an IPO, listing on the NASDAQ in August. There is also a strong pipeline of UK companies rumoured to IPO late this year or in early 2025. These companies include the challenger banks of Monzo, Starling, and Revolut, as well as the Scottish brewing company BrewDog. 

Fran Yearsley, the Deloitte Emerging Growth Companies US IPO lead, says that “cautiously optimistic” is probably the best description of the IPO market at the moment, given the backdrop of economic uncertainty, market volatility and geopolitical risks. However, she also emphasises the importance of undertaking an IPO readiness exercise well before your company is actually planning to list. “The backlog of companies keen to IPO demonstrates the value of being ready to go when the time is right.”

Several acquisitions involving high‑growth tech companies have already occurred this year. Among these is Fast 50 alumni Deep Casing Tools, which Drilling Tools International acquired in March 2024.

In July, biotechnology company EyeBio was acquired for £1.01b by US pharmaceutical company Merck. The London‑based firm develops gene therapies to tackle eye diseases.

“Cautiously optimistic is the best description of the IPO market at the moment, given the backdrop of economic uncertainty, market volatility and geopolitical risks.”

 

Fran Yearsley, Partner, Deloitte

For scaling tech companies who are considering an exit via M&A, Kiren Asad, the Deloitte Fast 50 lead partner says, “nearly a third of deals are taking longer to complete than forecast at the outset. So it is vital that sellers do all they can to keep the process moving forwards.” There is only one tried and tested way to make sure this happens: good preparation and good advisers. Kiren adds, “like everything else in the deal process, diligence will work only if the seller has invested enough time – at the right time with the right adviser – in planning and preparation.”

There is no denying that these high‑growth companies are operating in difficult conditions, and not all will make it to exit. This can be a choice for successful companies—such as those in the Fast 50—with 44.6% of Fast 50 company CEOs saying they want their company to remain privately owned. For other companies that have not reached this level of success, it is a matter of growing enough to make an exit viable—this can take time. Of the 80.3% of high‑growth tech companies that have survived between 2014 and 2024, 6.58% have exited. Fortunately, survival may be becoming more likely. There are promising signs that point towards recovery from the difficult conditions of the last few years. The Fast 50 companies celebrated throughout this report demonstrate that growth is possible even in these times of hardship. By surviving through these periods, these companies have positioned themselves to seize liquidity as it returns to the market and achieve further success, or an exit, on their terms.

1. McKinsey & Company, “Baptism by fire; Talking with Zopa’s Jaidev Janardana,” 15 September 2022.https://www.mckinsey.com/industries/financial-services/our-insights/baptism-by-fire-talking-with-zopas-jaidev-janardana

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