UK Technology M&A Snapshot Q2 2021

GLOBAL TECH BANKING UK Tech Q2 M&A trends UK M&A DEALS (H1) 500

UK TECH M&A 450 DEALS (No.) 400 268

247 +47%

236 GROWTH IN 232 350 227 226 DEALS IN H1​ 209 206 195 192 300 167 168 163

250

130 23x AVERAGE EV/EBIT MULTIPLE​ 200 H1 15 H1 16 H1 17 H1 18 H1 19 H1 20 H1 21

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 TYPE OF ACQUIRER

2018 2019 2020 2021 50%

TECH M&A VALUATIONS Cross border 40% 26.0x 49% OVERSEAS 30% ACQUIRERS

21.0x Price/EBIT 20% PE/VC backed

16.0x 10%

Linear (Price/EBIT) 11.0x 0% 2015 2016 2017 2018 2019 2020 2021

6.0x GLOBAL TECH BANKING 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 UK Tech £1.2bn / 10x revs LOGISTICS Deals Q2 2021 £700m / 35x FINTECH

• There was a record number £1.1bn / 23x ECOMMERCE of UK M&A Tech deals in H1 2021 with 500 deals announced - a jump of 47% £366m / 17x VR YoY and 5% more than a very busy 2019. • A tidal wave of money has driven M&A valuations to near £345m / 8x ENTERPRISE record levels with average EBIT multiples in UK reaching a lofty 23x. Multiples at Nutmeg, BluJay, Depop and £307m / 1x IoT COMMS WaveOptics are much higher than that, offering tomorrows price today. It’s a great time £181m / 1.7x FINTECH to be a Tech shareholder. • Overseas travel has been grounded but overseas and PE backed acquirers continue £156m / 7x CYBER to be aggressive, driving the buoyant Tech M&A market.

£95m / 14.7x FINTECH

GLOBAL TECH BANKING FinTech Competitive tension can add 20-47% to deal value

Australia’s EML Payments is entering the European and UK market for Open Banking services In the last year or two we have seen through the acquisition of Irish firm considerable repositioning as major Sentenial and its NuaPay product. institutions seek to digitalise with It is paying €70 million, plus an JP Morgan Chase, the largest significant deals by the likes of Aviva earn-out component of up to €40 bank in the US has made over and M&G. However, the consolidation million. Sentenial is a cloud-native, 20 acquisitions in the past year accelerated in Q1 2021 with several API-first, payments company, is selling its trading software and is now adding robo-adviser wealth management platform deals processing €45 billion per annum division (Finalto) who offer trading business Nutmeg for circa £700m like Preservation Capital/Parmenion, and is dually regulated in the United CRM and back office systems in a aggressive push into UK wealth James Hay/Nucleus, ii/Equiniti and Kingdom and France. There looks for brokers and financial trading. management space. The price AjBell/ Adalpha. a good geographic fit with EML Having accepted a $210m offer from equates to nearly 20% of assets who have grown from gift management team it has attracted under management and Nutmeg card routes while Nuapay has a $250m counter bid from Gopher remains loss making. Also, although connections with most banks and (which is effectively Asian investment revenues are growing at a good clip manages payments across the two group TT Bond and Partners). Given it is over 30x revenues. So the deal major card schemes Mastercard the different deal structures the metrics don’t really make any sense and Visa, and money transfer. increase in value for Playtech could and can only really be justified as a be 20-47% higher than the original technology acquisition, or have JP offer - again showing the significant Morgan been nutmegged? UK listed Gresham Technologies power of “competitive tension” in an acquired Electra Information exit process. Systems for $39m of which $29m is upfront the balance is based on next 2 years revenue. Electra is a New York-based provider of secure financial technology for post-trade processing. The valuation was 3x revenue or 30x EBIT.

GLOBAL TECH BANKING Enterprise Software

Aligned Assets, has been acquired ClearCourse Partnership has been by UK listed Idox for £7.5m and the most aggressive acquirer in UK potentially rising to £10.5m in the past few years acquiring a through earn-out. That is nearly company each month and have now 4x revenues, both are focused on made 25 acquisitions mainly in the local authorities. Aligned Assets CRM/Payments space. However, , (extended workforce Beeline (based in Woking) provides data although they acquired PPM platform) backed by US New quality matching and cleansing, to Software which focuses on health Mountain Capital acquired Dye & Durham has been sub-second predictive searching, practice management software in JoinedUp, a high-volume workforce aggressively expanding in the U.K. as well as solutions for managing, Q1 the deals have dried up in Q2. solution catering to the challenges real estate value chain, in May it sharing and viewing address data. It and complexities experienced in acquired both Future Climate Info is particularly used for street naming the field with shift-based temporary and Terrafirma. FCI was acquired and numbering. Idox rejected a labour. Doug Leeby, Beeline CEO, for £55m, it produces a range of £400m offer at a punchy 5x revenues said, “High-volume, shift-based work environmental search reports for the from D&D earlier this year but they is about one thing- fulfilling open residential and commercial property may well be back. shifts. We now provide the head markets. It also paid £12m for office with compliance and visibility Terrafirma which helps the property and field operations with scheduling, shares rose 25% in Q2 sector understand ground risks like time & attendance, and complex rate partly due to busy M&A at the end of mining, subsidence, coastal erosion calculations”. Nice job, Doug. Q1 selling Groundsure (property and and landslides. D&D is in the midst of flood risk assessment) toATI Global, its “Build to a Billion strategy.” the Australian legal technology, software and information services group for £170m (8.5x revenues but a reasonable sounding 14x EBITDA). Dye & Durham are It made impressive EBITDA margins building to a billion of 60%. The deal comes hard on the heels of the £73m sale last December of Glenigan to Byggfacta for 11x EBITDA. It had similarly impressive margins.

GLOBAL TECH BANKING Vertical IoT & AR Software

US based Intapp which specialises Snap has paid £366m for Oxford in cloud-based software solutions based WaveOptics, an AR startup for professional and financial that makes the waveguides and services firms has acquired projectors used in AR glasses. They Belfast-based Repstor for £16m overlay virtual images on top of the cash and a further chunky looking views of the real world and Snap Telit Communications (IoT and M2M £20m earn out. Repstor creates worked with WaveOptics to build communications) has been acquired Microsoft 365-based enterprise its latest version of spectacles. Its by DBAY Advisors for £307m after content management and team a cash and shares deal of which US listed Supply-chain technology 8 months of negotiations. It is more collaboration tools. Repstor has a 50% is deferred 2 years and is 17x provider E2open acquired UK than 50% over the listed price strong partnership with Microsoft revenues. It is also a big jump from logistics software company BluJay before the approach. DBAY were and helps firms to get the most out its most recent valuation which was Solutions for a massive £1.2bn or already 26% shareholders and are of their Microsoft 365 investments, only around £75m. about 10x revenues. Supply chain renowned value investors – hence including SharePoint and more has had a lot of focus this year with the 1x revenue valuation. “DBAY recently Teams. Initial focus was law pandemic-driven shortages and invests in companies overlooked firms but client base is now broader. Evergreen chaos causing shipping or deeply misunderstood by the Snap snaps up startup disruptions. BluJay, based in market and in many instances out Manchester, provides cloud-based of favour with investors, often taking supply-chain execution software a contrarian view”. It was over 10 and services, including platforms to years ago that Israeli backed Telit manage freight transportation and acquired Motorolas M2M business global trade compliance. Only two for $180m. Again it shows the power weeks before this BluJay themselves of competitive tension as the DBAY acquired Raven Logistics a logistics offer was increased 16% as a result management company focused on of Swiss based U-Blox also entering rail transport, so it was a busy May 10x revenue for logistics talks. In fact, it has been a messy for them. last few years for Telit who lost their software BluJay exotically named ex-CEO Oozy Cats who failed to disclose a criminal record. Not great communications.

GLOBAL TECH BANKING Lots of smaller UK cyber services Private equity firmAugust Equity M&A activity such as: has invested in cyber security Cyber specialist Integrity360. In addition to the investment funding, Security Integrity360 founder and CEO Eoin Goulding is joined by Ian Brown, (ex SecureData, which was acquired NCC Group is acquiring Iron by Orange in 2019) with a plan to Mountain’s intellectual property accelerate growth via acquisition. management (IPM) division for Sounds familiar. £156m which equates to a chunky 7x revenues but a less impressive 10x EBITDA. The division has impressively high margins although client retention rate a bit higher than one might expect of 86%. The acquisition Texan based Forcepoint (ex Coalfire, a provider of cybersecurity Raytheon/Websense) acquired should help kick start growth at NCC advisory and assessment services whose shares are showing signs of Deep Secure adding a cloud- was sold to Apax Partners. Tom life at a four year high, although still hosted threat removal tool to its McAndrew, Coalfire CEO, said Symphony Technology Group valued at around 3x revenue it is cyber security portfolio. Founded they were “focused on optimising spent $4bn buying McAfee’s in 2010, Malvern-headquartered hardly priced for growth. the pervasive shift towards multi- enterprise business division, so only Deep Secure employs 40 staff. The cloud environments and remote a few months after IPO McAfee has company grew its revenue 35% to operations”. cut itself in half. The valuation of 3x £6.6m in 2020, boosted by a mass revenues is far from exciting in the BlueVoyant, a US cybersecurity migration to home working with the current market but perhaps reflects services specialist, acquired shift to cloud-based security. flat enterprise revenues and loss last UK-based Marclay Associates, year. Symphony also bought which provides incident response RSA last year for $2bn so it’s a and cyber investigation services Security sector they know well. as well as a governance, risk and Home working has accelerated compliance practice. cyber shift to the cloud Perfect Image acquired Cyphra, Northern Ireland’s leading provider of cyber security solutions. Through its partnerships with market leading global cyber security vendors, including Palo Alto Networks, F5, Fortinet, CyberArk and Checkpoint.

GLOBAL TECH BANKING virtual behavioural healthcare for mental health) with an EV of $1.4bn. Health & Valuations are difficult to assess but all should see significant funding to Education accelerate growth in these exciting UK based tech companies. US based RLDatix, a provider of Northgate (part of NEC) has Software governance, risk and compliance acquired Vantage Health, which (GRC) solutions to the healthcare provides `Rego’, which reviews all market has acquired Allocate patient referrals against local criteria Software, which focuses on human and pathways and ensures patients capital management solutions are directed to the right care, the also in the Health sector. Allocate first time.I It is used by the NHS but was backed by Vista and Hg while have sold their share of the also general practitioners dentists RLDatix is owned by Five Arrows Axelos JV to PeopleCert for £172m. and opticians. With COVID impact (Rothschild & Co). Terms weren’t The valuation is 12x EBITDA or on waiting times the need for this disclosed but the sale realised an nearly 8x revenues will help further has never been greater. Separately Juniper Education has impressively uplift of 20% of the carrying valuation reduce its debt. You may not have Northgate is to be renamed NEC completed 10 deals in the past of Allocate in the Hg portfolio,. Given heard of Axelos but will have heard Software Solutions this month. 2 years since taking investment that the Hg portfolio is valued at 23x of their best practice methodologies from Horizon Capital. It latest EBITDA it suggests another tasty and IP such as PRINCE2 and ITIL. is £12m acquisition of Newark multiple. PeopleCert are their international based PrimarySite, which Partner. Meanwhile, Capita is still at provides nearly 5,000 primary break even and now several years schools, academies, and trusts into a painful turnaround. The shares with websites and comprehensive are still down 95% in past 5 years. parent communication solutions. As Craneware PLC acquired Florida- Chairman Gavin Freed commented based software-as-a-service “Over the last year, schools have solutions provider Sentry Data had to rethink the ways they keep Several UK companies have been Systems Inc. for $400m in a mix of parents and pupils engaged and acquired by SPACs at mind boggling cash and shares. The deal equates supported”. Hence the attraction. valuations including: Babylon Juniper is a quick learner to 4x revenue and 17x EBIT in a Juniper are on a rip following earlier (health technology – GP at Hand chunky move by Craneware, adding deals like EES for Schools, OTrack, which is growing at 4-5x a year) in scale to its US operations and ClassroomMonitor, Maze Education, a $4.2bn merger. Cazoo (used on- expanding coverage to US hospitals Pupil Asset, FS4S, SISRA, and Jane line car retailer) in a $7bn merger and pharmacies. Systems. and Spark-Space, (digital and

GLOBAL TECH BANKING combining ANS’s public cloud, DevOps, applications and data Digital Transformation expertise with UKFast’s leadership in private cloud, hosting and security, to create the UK’s independent leader in secure cloud-led digital transformation across the public and Kerv (backed by LDC) has private sectors. announced its fifth purchase in a year with the acquisition of cloudThing, a bespoke software development provider and a Microsoft Dynamics/Power Platform has now made 4 acquisitions EY has acquired UK-based Microsoft specialist. The price wasn’t disclosed in succession as it expands its Gold Partner Pythagoras which has capability and its geographic reach skillsets across Microsoft Business but with turnover of c£10m growing by acquiring Workday Partners. Applications, such as Dynamics at 30% and 25% EBITDA margins, it They previously acquired Implexa, 365, Power Platform and Azure. would not have been cheap. Kerv Formulate and Intuitive. This year Shareholders include Vin Murria, is the merger of DoubleEdge, Access Group has acquired they acquired the Workday division (ex-Advanced) which owned 50% Foehn, and Metaphor IT and has Wolverhampton cloud IT managed now reached £35m revenues and is of Helsinki based Cloudator to of the business, alongside the services provider Oosha. It’s a nice broaden their European footprint. founder Julian Stone. With £10m another PE backed buy and build roll tuck-in deal for Access adding 70 Kainos is growing nicely at 30% pa revenues and 10% EBIT margins it’s up in the Microsoft space. Oosha staff for the Legal sector and the shares have rocketed, nearly a nice add on for EY which acquired specialist in a rapidly consolidating doubling in the past year and trading four tech businesses in 1H. Big 4 environment as technology plays an on 9x revenues. accounting firms have become ever more critical role in delivering increasingly active as they look to digital legal services, which the add sticky tech revenues. pandemic has certainly accelerated.

Inflexion has acquired ANS, a provider of digital transformation and PE backed Buy and Build cloud managed services. Founded targets digital transformation in 1996, ANS has 240 staff and is a key partner to Microsoft and Amazon Web Services. Founded in 1998, ANS will be merged with UKFast

GLOBAL TECH BANKING Digital Transformation is a Cisco Cloud and Managed Services Certified Partner with over continued 200 employees. The firm provides eCommerce data, voice, security and technology services to more than 8,000 customers with revenues of £60m. They had previously made a few acquisitions such as VIA, Townley and Qubic.

Managed IT services provider AdEPT Etsy, the $20bn New York-based Recently UK listed Auction acquired Datrix for initial cash of marketplace acquired Depop, Technology acquired £9m and a one year earn out that a London-based marketplace LiveAuctioneers an online arts and could add another £7m. Datrix is a targeting millennial and Gen Z antiques marketplace for $525m. supplier of advanced cloud-based consumers interested in social It’s a fast growing market as auction networking, communications, and shopping. Etsy is paying $1.6bn deals move online and this will give cybersecurity solutions, based EDM Group, sounds like an for the company or a massive US expansion and $2bn of Total in London, with expertise in the electronic dance music business but 23x revenues. The attraction is Hammer Value. However, at 17x growing ‘software-defined wide area is in fact a Wolverhampton-based their users - 95% are under the revenues and 33x EBIT the valuation networking’ (SD-WAN) market. Given digital records firm. It has been age of 26, and this will give Etsy a is as eye watering as the recent Datrix has revenues of £11m and acquired by UK-listed Restore for sizeable opportunity both to tap sale of NFTs but less than Auction EBITDA of £1.5m the multiples were £61m, more than a 2.3x revenue but them and their community. Josh Technology’s own lofty rating of 20x pretty low reflecting it is more of a 22x post tax profit. EDM is a B2B Silverman, Etsy CEO, said in a revenue. solutions provider than an IP owner. document management specialist statement. “Depop’s world-class and another example of accelerating management team and employees digitalisation as companies convert have done a fantastic job nurturing physical documents into digital at an this community and driving organic, accelerating pace. EDM provides authentic growth in a way that aligns information management, digital well with Etsy’s DNA and mission of mailrooms, digital automation and Keeping Commerce Human”. digitisation services to clients from a wide array of sectors. Restore is now worth nearly £600m trading at over Private equity firmMacquarie 3x revenue. 23x revenues for social Capital has acquired Cisco Partner Wavenet from Beech Tree. Wavenet shopping

GLOBAL TECH BANKING For further details contact:​ Brian Parker, Head of M&A ​ [email protected]​ +44 (0)207 152 6375​ +44 (0)777 556 7335

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