London-based tech-focused corporate finance advisory firm ICON published its Technology M&A Mid-Year Review highlighting key developments in the tech mergers and acquisitions space.
The United Kingdom’s macroeconomic situation has been dampened by the result of the Brexit vote. However, as the British pound has weakened substantially since the referendum outcome British exporters have benefited greatly and so have foreign companies looking to acquire UK assets. The latter is reflected by the fact that UK targets for tech acquisitions have increased by 13% versus last year.
A key trend that has discontinued from 2015 into the first half of 2016 has been the number of prominent tech IPOs. 2015 saw the highest valuations in global tech M&A deals with high profile IPOs such as Fitbit and PayPal hitting the market. In 2016, however, IPO activity has been subdued in the tech sector with the only notable IPO having been Dell’s Secureworks in the US. In the UK, 2015 saw IPOs from Sophos, WorldPay, Kainos, and Softcat but none worth noting in the first half of 2016.
Adversely, in the M&A space, there has been quite some activity in the tech sector this year. In the US, Microsoft acquired LinkedIn for USD 26.2bn, while Verizon bought Yahoo’s operating business for USD 4.8bn and telematics business Fleetmatics for USD 2.4bn. Furthermore, Oracle purchased cloud software business Netsuite for USD 9.3bn and IHS had a merger of equals with Markit to compete with Bloomberg as a financial data analytics provider.
In the UK, overseas acquirers have dominated M&A activity. The largest deal of note has been Japan’s Softbank purchase of chip developer ARM for GBP 24.3bn. There has also been a range of smaller acquisitions; such as Indian outsourcer Tech Mahindra’ acquisition of Cardiff-based Target Group for GBP 110, while Twitter acquired Magic Pony, a small London-based machine learning start-up for USD 150m and NewsCorp purchased Wireless Group for GBP 220m. Google also acquired UK-based start-ups, including DeepMind, spider.io, Rangespan, Dark Blue Labs and Vision Factory.
Despite ‘Brexit’ uncertainty UK tech M&A activity has continued in the first half of 2016 with a range of deals mainly driven by foreign acquirers motivated by the weaker sterling. According to ICON’s Head of M&A, Brian Parker, its “business as usual” on the UK tech M&A front.