The information and technology sector is a critical engine of innovation, productivity, and economic growth in the UK. As one of the fastest-evolving industries, it plays a central role in shaping the country’s competitiveness on the global stage.

However, in the last few months, the tech sector has experienced a notable rise in insolvencies, reflecting mounting financial pressures and broader macroeconomic turbulence. Data from the Insolvency Service shows that total company insolvencies in England and Wales reached 1,992 in March,  a 9% increase year-on-year. While sector-specific breakdowns are limited, the tech sector was among the too 5 that were impacted. Notably, the number of administrations rose by 17% from February and was 30% higher than in March 2024, suggesting heightened restructuring activity among mid-sized tech firms.

Global tensions and strained international trade relations have also added to the uncertainty being faced by investors looking at the UK as a growth market, and made it a challenging landscape for technology businesses of all sizes.

Despite sector-wide headwinds, startups in the tech space showed surprising resilience. According to PwC, startup insolvencies in 2024 hit their lowest share of total failures in a decade at just 46%. This suggests that younger tech firms, perhaps due to leaner operations and faster pivoting ability, were better positioned to withstand volatility than larger, more rigid counterparts.

What it means for distressed business buyers

This environment presents many favourable opportunities for those prepared to move quickly. Here are some things that distressed business buyers can keep a lookout for when targeting their next acquisition: 

Evaluate increased deal flow from mid-sized tech firms: The spike in administrations in March and April indicates that many mid-sized, previously stable tech companies would have entered formal restructuring around this time. These businesses often hold valuable IP, developed software platforms, user bases, and operational infrastructure that can be acquired without the burden of legacy liabilities.

For buyers, this means access to ready-built systems, tech teams, or data assets at a fraction of their original value.

Look for asset-rich, debt-free acquisitions: Insolvency processes like administration and pre-pack administration allow buyers to purchase specific assets (e.g., IP, customer databases, code repositories, brand rights) without assuming old debts or contracts. With the tech sector, this is especially valuable. A distressed firm’s technology or client base may still be high-quality even if its financial management was not. 

The UK’s insolvency regime, especially around administration is designed to protect creditor interests while providing clarity and structure for buyers. Pre-pack sales, when properly handled, allow quick transitions with minimal disruption, while still maintaining legal and reputational safeguards.

Falling valuations = higher ROI Potential: Economic uncertainty and increased insolvencies typically suppress valuations, which gives buyers stronger negotiation power. Tech businesses that would have commanded high multiples in the VC-driven market of previous years are now likely being sold at discounts offering a lower entry point and higher upside potential post-acquisition.

Acquire talent and innovation at less than market value: Many distressed tech firms house experienced technical teams, patents, or novel technologies. Buyers can use acquisitions to absorb innovation pipelines, fill talent gaps, or consolidate R&D capabilities. Often, this can be done without the time and cost of building from scratch.

Startup resilience creates follow-on opportunities: With startups remaining more resilient, there’s opportunity for buyers to acquire failed competitors of startups they already back.

There may also be cases where startups can offer bridge capital or strategic support to young companies on the edge of distress.  Building a portfolio of lean, agile tech firms positioned to scale once conditions improve can be a big win.

Insolvency News | The Collapse of Builder.AI

Microsoft-backed UK start-up Builder.ai has entered insolvency proceedings following a major internal investigation and a dramatic cut to its revenue estimates.

Once valued as one of the UK’s most promising tech ventures with over $500 million raised from investors including Qatar’s sovereign wealth fund, Builder.ai collapsed after lenders called in defaults. The move came after the company submitted provisional accounts showing 2024 revenues revised down from $220m to $55m, and 2023 figures restated from $180m to around $45m, according to sources.

The discrepancies triggered an internal investigation by a law firm, which found signs of possible revenue inflation and raised concerns about the legitimacy of certain Middle East-based resellers. Some previously recorded sales had reportedly gone unpaid for extended periods, casting doubt on their validity.

Former CEO and founder Sachin Dev Duggal, who previously held the title “chief wizard,” stepped down earlier this year alongside the chief revenue officer, though Duggal remained on the board. In October 2024, Builder.ai borrowed $50 million from a syndicate of lenders, including Viola Credit, Atempo Growth, and Cadma Capital, reportedly backed by Apollo Global. These lenders later seized company funds, triggering insolvency.

They are currently focusing on an orderly wind-down and preserving value for employees, and there have been no other official comments yet. 

Insolvency News | Manta Systems Enters Administration

A long-established subsea engineering company based in the North East has entered administration just a year after it was acquired by global marine services group PXGEO.

Darlington-based Manta Systems UK, formerly known as Modus Subsea Services, had endured several years of financial losses. Earlier this year, it faced a winding-up petition from Tompkins Investments, owned by former Modus founder Arthur Tompkins.

The company, which at its peak employed 67 people, specialised in autonomous underwater drones for the oil and gas sector. It rebranded to Manta Systems in September last year after selling its fleet of ROVs for nearly £5m in 2022 to focus on intervention drone technology. That same year, the business posted a £1.3m operating loss and reported net liabilities exceeding £9.7m.

The firm’s acquisition by PXGEO had been seen as a strategic move to strengthen subsea capabilities, particularly following a major contract with Equinor to supply underwater drones at the Johan Sverdrup oil field.

Despite efforts to secure a rescue buyer, the business ultimately collapsed. All remaining staff were made redundant in February, and Gareth Harris and Lee Lockwood of RSM UK Restructuring were appointed joint administrators shortly after.

Harris commented: “Manta Systems had limited options following sustained losses and a winding-up petition. A business sale wasn’t possible. The challenging economic conditions only added to the difficulties the company faced.”