UK Technology M&A Review

UK Technology M&A Review January 2021

GLOBAL TECH BANKING 2 3

• The strangest of years but massive Contents government stimulus in response to COVID-19 – whatever it takes Key • Interest rates fell to record lows and 3 Key Findings squeezed valuations even higher • Wave of cheap money fuelling strong Findings 6 Highlights equity markets -NASDAQ up 43% last year. FANG+ doubled 10 UK Technology M&A • Retail investors created bubbles in • Overseas buyers are still key in UK, 13 FinTech the likes of Bitcoin, Tesla and US and accounted for a record 48% of Cloud software IPOs deals in 2020 14 Legal & Compliance • Lots of UK Technology M&A activity, • Consolidation in Payments, Logistics, 15 Property Related over 700 deals. Q4 was up 6% YoY – Legal, Property, Education and digital near record volume transformation 17 Transport & Logistics • UK valuations rose again, 5x • Busiest acquirers in UK in 2020 were 19 Hardware revenues is increasingly common PE backed – such as Advanced, 19 Cybersecurity Access, Clearcourse but also included new buyers from Australia 21 IOT/AI & Machine Learning and Scandinavia 22 EdTech NASDAQ - WHAT CRISIS? • We have a vaccine, Donald has gone, Brexit is behind us – what can 23 Human Capital Management Tech possibly go wrong? 24 Cloud Software 13.5k 25 Information Management 12.5k 26 eCommerce

27 Communications 11.5k 30 ICT Managed Services 33 Computer Games 10.5k 34 Risers & Fallers 9.5k 36 US Technology M&A 8.5k 40 Alternatives – IPOs & Private Equity 7.5k 44 ICON Selected Deals 6.5k

5.5k

1/19 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21

TECH M&A REVIEW v 4 5 No. GLOBAL 2 0 2 1 0 TECH M&A DEALS Q4 1 Key M&A 9 9

2 1 Statistics 3 6

2 .

UK PRICE to EBIT (x) 2 6

1 2 12mth AVERAGE

8 5

3 4

2,534

2 0

0 2

2 0

0 0 02 2 +9% 0 / 223 2020 6 9 21 9 01 18.4 201 9 6 No. UK TECH 2 37 8 No. GLOBAL % / / 5 M&A DEALS YEAR 4 6 TECH M&A DEALS YEAR 8 0 % 4 2 No. UK TECH 9 0 2

2 0

9 M&A DEALS Q4 2

1 0 1

1 UK PERCENTAGE of

CROSS BORDER DEALS

7 711 8

8,696

1 0 -8% 2 -19 % 223 +6% 48%

Key Macro D E NASDAQ C

Statistics 3 20 1 0 2 2 31 0

1 C E 9 D 202 31 0 EC 9

D 6 0 2 3 US$/£

47 0 . 6 6 1

/ EXCHANGE RATE

/ 12,890 /

4 1 3

5 2 3

7 8

9 FTSE

1 0

+43% 9 BITCOIN (US$)

0 1

2 D 0

1 C 2

3 3 1

9 0

01 3

2 2 311

1 1

C 0 3 /

2 C 6

C 0 3

E E 1 1.36 D 1 1 E

D D

E D C C DEC 3

31 1 E 2 2

6,472 0 D 1 +3%

9 0 29,000

2 0

4 0 1 0 6 DE

7 C 31 0

-14% / 2 9

NYSE FANG+ 01 2

4 9 +302%

FTSE techMARK 0 4

7 3 7

0 8 1

5 D

1 9 E 1

3 0

UNICORNS 2

D 1

3 3

1 E C

C E 2

6,311 D 0

3 2

4,070 0

2 0

+103% 2 -2% 513 0

TECH M&A REVIEW +17% 6 7

UK TECH M&A DEALS (No.)

Highlights 248 227 223 210

2020 was the strangest of years, clearly Central Banks are doing “whatever it 206 199 192 COVID-19 has had a massive impact, takes” to reduce the economic impact of 192 disrupting life globally. Health has risen the pandemic. As a result, interest rates 168 165 to the top of the agenda but with mass are at record lows and look set to remain 163 vaccinations being rolled out in 2021, at near zero for the foreseeable future.

there is light at the end of the tunnel. Many bonds are now negative yielding, 124 Microsoft Teams/Zoom and digital which has pushed more money into working have clearly boosted the Tech riskier assets. The Technology sector has sector, accelerating digital transformation again been a prime beneficiary. So, while “UK tech deals also by years and enabling Tech M&A activity the FTSE fell 14% last year, remarkably bounce back to near to continue relatively unaffected. The the NASDAQ was up over 40% and the report showcases the wide selection of FANG+ index doubled. While bond yields record highs – up Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 UK tech M&A deals that closed in 2020. stay super low, lofty valuations of growth 6% in Q4 2018 2019 2020 stocks are likely to persist. ” US 10-year bond yields are currently 1%. The last tech In UK there were 711 Tech M&A deals GLOBAL TECH market wobble in 2H18 was There is clearly a bubble led by private in 2020. Despite all the Brexit and COVID M&A DEALS (No.) caused when these yields investors in some assets. Just look at uncertainty, that is similar to both 2017 increased to 3%. So, the bitcoin and valuations of Tesla, Airbnb, and 2018 and only a slight drop on 2019, key to stretched valuations Zoom, Snowflake. Although the NASDAQ which was a record year. In fact, the is low interest rates. 2547 2534 PE of 25 is high, it is nowhere near dotcom recovery was so strong that 4Q20 was up 2486 2379 2364 bubble valuations. IPO volumes remain 6% YoY in UK. The acceleration in digital 2331 2344 2326 2289 2263 2213 quite subdued but there have been a few working in the M&A process with video- huge successes with record valuations conferencing, virtual data-rooms and (Snowflake on 150x revenues) and the Cloud computing has been key. Global tech deals emergence of the SPAC which raised 1685 “ a whopping $79bn in 2020. On top of UK Tech valuations continue to climb bounce back to near . Some valuations this wave of cash, driven by FOMO, US towards 20x EBIT are significantly higher, particularly for record levels in Q4 companies borrowed a record $2.5tn last ” higher growth, Cloud-based software year, driving leverage to an all-time high. businesses, with Keysight, Byggfakta, There is simply a tsunami of cheap funding RELX, Elmo, Tracsis and Broadridge, looking for a home. Many used these Ideagen and Aptean all paying over 5x funds to plug the hole created by COVID, revenues for UK targets. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 while others used the funds for M&A. As a 2018 2019 2020 result, there were 4,700 global tech M&A Accelerating digitalisation is ongoing and deals in 2H20, up 4% YoY and three of the is at the core of much of the UK M&A largest US deals were at valuation of more activity. In addition there are three main than 30x revenues. drivers in UK Tech M&A:

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• Overseas acquirers now account adaptable to external changes – which is PRICE/EBIT SECTOR SPLIT for a record high, representing 49% pretty handy in COVID. 2021 is the year of 24x of all Tech deals in UK (up from 37% the Metal Ox, and its message couldn’t be last year). Throughout 2020 we saw clearer: Success will come to those who Tech valuations 22x “ significant activity in the UK from work hard. Really hard. Oxen are reliable disconnect from Aptean, MRI Software, Descartes, and strong working animals. That sounds HelpSystems, Microsoft, Broadridge, encouraging, if a little dull. 20x Comms sector Accenture and Keysight, alongside ” Comms some newer names like Byggfakta (Scandinavia) ELMO (Australia) and 18x MessageBird (Holland). “Global Valuations jump above 20x EBIT 16x • Private equity ” funded buy-and- IT build programs 14x continued at pace, TECH M&A VALUATIONS – GLOBAL notably: ClearCourse 2.5x 25x 12x Partnership, Juniper Education, Advanced, 10x Access Group, Iris Price/revenue 2012 2013 2014 2015 2016 2017 2018 2019 2020 and Civica. They (LHS) seem to be pigging out on a wave of 2.0x 20x cheap money. TECH M&A VALUATIONS – UK • Restructuring. A 3.0x 28x series of restructurings started before COVID-19 hit and is 1.5x 15x Price/EBIT likely to continue as Price/EBIT (RHS) 2.5x (RHS) 23x businesses refocus. For example, in the UK Babcock sold its cyber arm, BT sold Tikit, and 1.0x 10x UK Valuations 2.0x 18x European operations, 2012 2013 2014 2015 2016 2017 2018 2019 2020 “ and Capita have also jump – now exited its Education We have a vaccine and we no longer have approaching and Legal software businesses to to deal with uncertainty of Brexit or ‘The 20x EBIT reduce debt. Elsewhere Sage, Equiniti, 1.5x 13x Donald’. Consequently, stock markets ” Admiral and Cobham have all sold have rallied globally. Yet the pandemic is non-core divisions. Price/revenue worsening and political tension is rising (LHS) Those who follow the Chinese zodiac in the US. What can possibly go wrong in 1.0x 8x will know that last year was the Year of 2021? Best to keep your head down and 2012 2013 2014 2015 2016 2017 2018 2019 2020 The Rat, an animal known to be highly work hard.

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UK TECH M&A – OVERSEAS ACQUIRERS two years. With interest 49% rates remaining low and UK Tech M&A significant funds raised Foreign buyers jump yet to be spent, this “ 38% to nearly 50% of UK 36% 37% is set to remain a key 34% driver. We have seen 2019 was a record year for UK Technology M&A deals – a record 32% activity with the number of deals up a massive 20%. ” a wave of PE backed So, against a very strong base, it is remarkable buy-and-build deals in that, despite endless Brexit uncertainty and COVID the past few years and lockdowns, activity recovered so quickly during 2020. that is unlikely to change Having fallen by 50% YoY in in 2021. Q2, by Q4 the market had Interest from buyers of fully recovered; remarkably UK Tech companies UK TECH DEALS QUARTERLY CHANGE YoY Q4 was 6% higher than remains very strong. 244 324 338 2019, making it one of the +10% 303 254 280 We ran an ICON Snap most active quarters for UK Survey in the midst of tech M&A deals ever. lockdown in May 2020. 0% 2015 2016 2017 2018 2019 2020 We asked all the Top UK acquirers of 2019 –10% what their appetite for Bouncebackability acquisitions was in 2020. Surprisingly, “ ” –20% 100% of those responding indicated that they were still interested in –30% Despite COVID, Brexit, acquiring Tech UK TECH M&A – PE/VC BACKED ACQUIRERS businesses lockdowns and travel –40% restrictions, cross-border in 2020. deals accounted for a They weren’t record high 48% of all deals –50% kidding. It was in UK in 2020. Normally a busy year, in economic downturns –60% despite its Q1 2020 Q2 2020 Q3 2020 Q4 2020 23% 24% challenges. overseas buyers tend to pull 23% up the draw-bridge and re- 21% focus. However, that was far 20% from the case in 2020. In fact, the breadth of overseas buyers has broadened considerably with significant new buyers from Australia, Scandinavia and Europe in 16% addition to the normal wave of US buyers. Private equity funded acquisitions also remain one 211 of the key drivers behind tech M&A activity in 2020. 171 122 153 166 162 The total VC/PE backed acquisitions accounted for 23% of all deals in 2020, which is similar to the last

2015 2016 2017 2018 2019 2020

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Largest UK Tech M&A Targets in 2020 advisers, with Funds Under Management EV £m PURCHASER TARGET EV / T/o (x) of £14bn. It has around 1,500 adviser FinTech relationships and over 90,000 underlying The biggest deal of the year was the customers. The acquisition gives M&G 34,000 9.2 announcement that S&P Global was the capability to offer third-party fund to acquire IHS Markit for £34bn or 9x management services, as well as ISA, SIPP and GIA wrappers on a single platform. 30,000 22.0 revenues. Consolidation in financial information is leading to ever larger deal Shareholders clearly approved, as the sizes, beating the £24bn acquisition of shares jumped after the announcement. 2,078 1.4 Refinitiv by London Stock Exchange last Interactive Investor acquired The Share year. IHT Markit started life as Information Centre in a cash and shares deal worth Handling Services, offering aerospace around £62m, the two companies had 890 9.4 engineers product catalogue databases. been in talks for some time. Again, it’s It is fair to say that it has moved on since about gaining scale to sustain profits then. The fact that the deal is an all-share with continued investment in the platform 850 2.3 merger around current share prices shows technology. Shareholders will be happy as you where we are in the cycle though. Late. it’s a 41% premium to the pre-deal share price. Share Centre executive chairman 650 4.6 Broadridge has acquired FundsLibrary, a leader in fund document and data Gavin Oldham said it would “transform” dissemination from Hargreaves Lansdown. its business and work towards “a more 543 3.4 FundsLibrary’s services link fund managers egalitarian form of capitalism” in the to distributors and investors to provide coming years. information supporting fund sales. The Australian listed Bravura acquired 508 4.5 solution helps fund managers increase Delta Financial Systems for up to distribution opportunities and comply with £23m which is 3.8x revenues for the both UK domestic and EU regulations business that is growing 20-30%. Delta 400 4.0 such as Solvency II and MiFID II. The cost provides technology to power complex of £53m equates to an impressive 7x pensions administration to support the revenues or nearly 30x profits. administration of SIPPs and SSASs. 235 3.3 All the 2020 headlines in the payments Bravura is on a roll, having acquired space were taken by mega deals from two companies in 2019 - FinoComp, 265 8.7 Worldine and Nexi (see below). In the UK, extending microservices offering to a payment solutions firmPaypoint acquired broader wealth management market, and card payments and terminal leasing Midwinter which has developed financial 11 0 13.8 businesses Handepay and Merchant planning software ‘AdviceOS’. Rentals enabling it to reach into new SME sectors - including groceries, hospitality, 107 4.1 food services and auto trade. At £70m the Crowdfunders are valuation was over 4x revenues. “ merging 104 3.0 M&G acquired Royal London’s platform ” business Ascentric, a leading digital wrap and wealth management platform for 73 6.1

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Other deals that are notable are over 20 acquisitions, following others and-build factory focused mainly on the £27.3m to conveyancing client O’Neill Euromoney Institutional Investor such as Redland Solutions, (RegTech) mid-market and is performing well with Patient Solicitors LLP. The valuation of acquiring WealthEngine for $14.5m. and Optima Diagnostics (compliance) revenues and profits up nearly 50% last 3x revenues at 11x EBITDA is solid but WealthEngine was a software-as-a- in 2019. To close the year with a bang, year. They completed eight deals in 2020 unspectacular, perhaps reflecting the sale service (SaaS) platform that offered having raised nearly £50m to fund more up from six the prior year, backed by Hg to a large customer rather than a tech intelligence and predictive analytics to deals in December, they went Xmas Capital and TA Associates. buyer. wealth managers, luxury brands and not- shopping paying £28m or 2.8x revenues In other deals: Levine Leichtman for-profit organisations. In addition, there on Huddle, a collaboration and workflow acquired BigHand (law firm workflow and were deals from Infront AB, who acquired platform for regulated industries. The Advanced is productivity) from Bridgepoint and LDC. order management software NB Trader, shares rose an impressive 40% in 2020. “ Thomson Reuters acquired CaseLines and Crowdcube acquired Seedrs. moving forward Mitratech, a US provider of legal which has a platform that provides a Ironically the crowdfunders are merging, ” and compliance software, acquired single, secure home in which to manage rather than raising new capital! ClusterSeven to boost its data privacy all types of legal evidence (400,000 trials BT has sold its legal, accounting and and information governance efforts. have used it). This effectively digitises professional services software business ClusterSeven, based in London, provides court processes by essentially eliminating Tikit, which it acquired for more than a solution for discovering, managing and paper and creating digital court files. £64m back in 2012. It was a strange deal monitoring “Shadow IT” – the hidden, Finally, Tenzing’s portfolio company Legal and at the time and looks to have found a sensitive End User Computer (EUC) CTS has acquired two legal specialist better home in Advanced, who acquired Compliance applications, spreadsheets, data assets managed service providers, Sprout IT Tikit in March. It is clearly non-core for and other applications that lie outside of and City Business Solutions (CBS). Nigel BT and continues the trend of large IT’s control. Wright, CEO of CTS, commented: “These corporates exiting non-core assets to re- acquisitions underline our commitment to Ideagen – 3 deals and Access acquired Capita’s Eclipse Legal focus. Advanced received funding in 2019 “ the sector and to our mission to become a shares up 40% in 2020 Systems, for £56m. It had pre-tax profit from PE (BC Partners, with Vista Equity legal sector powerhouse”. ” of £5.5m last year, so looks like an Partners remaining an investor) and this earnings multiple of 10, although oddly has accelerated their acquisitions having Acquisitive AIM-listed, compliance and they announced it was quite a bit better acquired Careworks, Kirona and Oyez, to risk management software specialist at 14x adjusted EBITDA. That shows how name a few. Ideagen had a very busy 2020. Firstly, it buyer and seller can see the same deal Dye & Durham (legal software), who Property Related acquired health & safety e-learning brand differently. Workrite from ergonomics company only recently listed in Toronto, acquired Posturite for a net cash consideration The money from the sale will be used Property Information Exchange (“PIE“), of £6.8m. That equates to about 4x to strengthen Capita’s balance sheet. for £31m. Operating under the trade name Getting a lot Bygga revenues or about 10 forward profits. Access also acquired legal specialist, DPS “poweredbypie” it offers a Cloud-based “ ” Its SaaS-based e-learning courses and Software who were founded way back in real estate due diligence platform for applications help employers meet legal 1988 and provide SaaS-based Practice conveyancing. PIE was majority owned LDC and the Royal Institute of British regulations, including first aid, equality and Management software for legal practices by MML Capital Partners. Matt Proud, Architects (RIBA) have sold NBS to diversity. Ideagen then acquired quality and In-house legal departments. Access Chief Executive Officer of Dye & Durham, Swedish based Byggfakta Group, management software provider Qualsys didn’t stop there as they also acquired said: “in an increasing virtual business a data and software provider to the for £15m in August and although it is a three businesses in Asia (a division of world, the dependency on mission critical European construction industry. punchy valuation at over 5x ARR, it reflects Sage for £90m or 2x revenue, Unleashed Cloud-based software like PIE’s has never Byggfakta are backed by private equity its strong momentum (ARR is growing at Software and Attache) all in financial/ been greater, as more and more people firms Stirling Square Capital Partners nearly 40% pa) and the fact that there are accounting and payroll. Access Group work from home.” Also ULS Technology and TA Associates. This was their first cost synergies. Ideagen have now made is another successful PE owned buy- PLC sold Conveyancing Alliance for UK deal. Headquartered in Newcastle,

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NBS combines the best content and GroupBC has an interesting back story. payments of £20m will be made over connectivity for anyone involved in the Formerly known as Business Collaborator, a period of 3.5 years. It equates to 3x design, supply and construction of it launched over 20 years ago as part of Transport And revenues. Digital Application developed the built environment. NBS previously Enviros Environmental Consulting. It has Logistics logistics software Matflo but has taken acquired SCL Schumann and EzySpec since been owned by CodaSciSys, then a while as it was founded back in 1971. in Australia. Hard on the heels of this demerged, and acquired by Unit4 Agresso Digital Applications and Dematic deal, Byggfakta acquired Glenigan arm before a YFM funded £4m MBO in 2014. Aptean makes a (previously Demag) know what they are of Ascential for £73m in December. YFM Equity Partners generated a return “ getting into as they have worked together Glenigan focuses on sales leads and “well in excess of 3x” for its investors. significant move for 25 years. Dematic is part of £5bn marketing information, market analysis, ” German listed group Kion. Although Barclays CEO, Jes Staley, said: forecasting, and company intelligence for “The notion of putting 7,000 people in US based Aptean, made a significant Two years ago, LDC made a £20m the construction sector. Valuation was 6x a building may be a thing of the past”, move in March, acquiring Dorking investment in Mandata who provide revenues and a reasonable-sounding 11x no-one seems to have told MRI Software based Paragon Software Systems, a software solutions for the transport and adjusted EBITDA. which is fast becoming a leader in real market-leading provider of transportation logistics industry. The company offers Westbridge acquired the bulk of Eque2 estate software solutions, through an management software solutions serving transport management software that in December for £46m buying out LDC aggressive acquisition programme. In the food and beverage, distribution and manages road haulage business and and others. Eque2 supplies business March it acquired Orchard Information retail industries. Its software manages has fleet tracking, telematics as well as management software to more than Systems, a provider of software solutions routing, logistics, scheduling, and home other related solutions. In June, Mandata 2,700 customers in the construction, for the UK social housing sector, with delivery. made their first acquisition acquiring housebuilding and contracting industries. locations in Newcastle and Donegal. Essex based which is an Founded in 1991, Paragon has more than ReturnLoads Eque2 made three acquisitions recently: Shortly before being acquired Orchard, online marketplace for hauliers and freight 4,700 systems deployed globally and is Miracle Dynamics, JNC Solutions and CliP itself previously unacquisitive, made a forwarders. The platform helps hauliers growing rapidly. William Salter, Managing IT Solutions. It also apparently developed rare purchase, buying Internetalia, a improve their productivity by reducing the Director of Paragon, said: “In joining the first Cloud-based job costing system maintenance software business. amount they travel without cargo. MRI the Aptean family, we are excited by the in the construction industry. Software then acquired Castleton, the opportunity to accelerate innovation, In February, US listed Descartes Systems UK listed social-housing focused software advance product development, expand acquired Peoplevox, a Cloud-based provider. Castleton has revenues of geographically and tap into its best ecommerce warehouse management £23m (down 12%) and so the £83m price Here’s to digital twins practice frameworks”. Aptean was formed solution. Jonathan Bellwood founded equates to 3.6x revenues and a 40%+ “ by the merger of CDC and Consoma back Peoplevox in 2009 following eight years advancement premium on its share price. That seems a ” in 2012 and is now focused on supply at Zebra Technologies. Based in London pretty full price for a business with falling chain, ERP and compliance software. they serve B2C ecommerce customers revenues that is still migrating to the It has developed a healthy appetite connecting webshop front ends. The US giant, AEC software vendor Bentley Cloud. Having made over 30 acquisitions, for acquisitions having bought seven business translates order information into Systems announced twins as it acquired funded by PE investors including TA companies in the past two years including a mobile-driven pick and pack process Reading based GroupBC. Simon Horsley, Associates and Vista, MRI is approaching UK-listed Sanderson for just over £90m within the warehouse and then feeds UK regional executive for Bentley Systems, $300m in revenues. Competitors face a (2.5x revs). Aptean is ultimately controlled parcel delivery systems for shipment said: “Our many UK users, projects, and tough decision to compete or sell to them. by funds managed by TA Associates and execution. Descartes paid £19m. owners, in common with GroupBC, will gain Vista Equity Partners. a lot from our joining forces to advance In June Descartes acquired Newcastle- Common Data Environment (CDEs) Logistics and supply chain automation based Cracking Logistics (aka through digital twins”. Wes Simmons, CEO is hot. Dematic acquired Digital Kontainers) for £9.5m (circa 6x revenues) of GroupBC, added: “Here’s to BC CDE Applications for £104m in March with of which 50% was paid upfront, with the and digital twins advancement!”. £85m in cash paid at closing. Further balance to be paid in a two year earn-out

TECH M&A REVIEW 18 19 based on future revenues. Kontainers many people working from home, it is a and confirm that devices are operating digital freight platform offers quoting, tough time to be in the public transport ‘as designed’ for functional safety and booking, tracking and dashboard sector right now. Hardware cybersecurity purposes. analytics. “The last few months have With the wave of M&A activity in the Much has been written about Softbank’s Motorola acquired UK-listed IndigoVision shown how quickly the world can change, sector, it is perhaps a surprise that proposed sale of ARM to Nvidia in a for just under £30m which equates to 0.7x and the shift to digitization is accelerating Kerridge Commercial Systems (KCS) complex deal for circa £30bn ($40bn), revenues and 17x EBIT. IndigoVision is as a result,” said Edward J. Ryan, did not join the party in 2020. Previously, having only acquired it in 2016 for $31bn. based in Edinburgh and designs, develops, Descartes’ CEO. KCS (ERP and supply chain solutions) Despite its WeWork losses, Softbank manufactures, and sells networked IP had made 11 acquisitions since Accel- actually recovered strongly in 2020 video security systems. The price of 405p KKR’s investment in 2015. Notable deals with its shares at near record highs as a share seems really attractive given that “Descartes get a included Electronic Data Processing a result of its portfolio shuffling and it has spent most of the past six months at cracking deal (EDP) for £12m, Insphire (heavy plant aggressive tech investing. This is the about half that valuation, so shareholders ” software) and MAM Software for $155m. largest semi-conductor deal ever, pipping will be very happy - unless they were the Broadcom deal back in 2016. A UK unlucky to have bought at the top of the Good Energy Group, the 100% markets regulator review could yet derail it. dotcom bubble when it reached £13, albeit UK-listed, transport software and renewable electricity supplier and energy very briefly. services company Tracsis acquired services provider has taken control of South Korean listed Hanwha Systems iBlocks for a maximum of £21m, which Zap-Map’s parent company, Next Green acquired UK antenna maker Phasor is a very attractive looking 7x revenues Car. Zap-Map is an app for the UK’s Solutions out of administration in June. or 19x profits. iBlocks, established in fast-growing 300,000 electric vehicle Phasor Solutions’ proprietary technologies 2000, specialises in the provision of a (EV) drivers - planning routes, identifying include flat electronically steered antennas Cybersecurity full-cycle of smart ticketing solutions, charge points, checking their availability, for use on aircraft, maritime, trains and including the development of mission and sharing power. With more than military vehicles. It’s an exciting market, Founder Keith Bloodworth has sold critical back-office systems used by the 250,000 app downloads, and 100,000 supporting connectivity over Low Earth CNL Software, which develops Physical Rail Delivery Group, the wider community registered users, Zap-Map (based in Orbit satellites with wireless Internet Security Information Management (PSIM) of train operating companies (TOCs), Bristol) is used by a significant amount of services like video streaming on planes, and software for the homeland defence and the rail supply chain. The acquisition the fully electric EV market. autonomous vehicle telematics. Phasor’s sector. The 19-year-old company consideration comprised an initial cash parent was about to close a significant provides situation management and payment of £12.5m plus a three year earn- funding round in March but, unluckily for web-based video monitoring software to out paying a further £8.5m on reaching them, that was pulled due to COVID-19 and protect physical assets such as HQs. Its profit targets. In a post Covid-19 world, MOST ACTIVE SECTORS – 2020 the resulting chaos in the airline sector. software offers risk management, security smart ticketing and contactless payment • Cloud Comms Siemens has announced the surveillance, facilities management, and will only accelerate. environmental and danger zone monitoring • Payments acquisition of Cambridge, based services. It was acquired for £28m (approx. In September, London based GoMedia UltraSoC Technologies, a provider of • Ed Tech 3x revenues) by US based , was acquired by Icomera, (which is owned instrumentation and analytics solutions that Everbridge • Prop Tech which is a $3bn listed US group that was by ENGIE the large French energy group). put intelligent monitoring, cybersecurity founded in 2002 in the aftermath of the GoMedia provides passenger Wi-Fi for • Legal Tech and functional safety capabilities into the tragic events of 9/11 with the mission of public transport and was founded in 2015 • IT Managed Services core hardware of system-on-chip (SoC). ‘helping to keep people safe amid critical by former Sky executives Matt Seaman UltraSoC is a pioneer of embedding • Payments situations’. They have a Critical Event and Roger Matthews. GoMedia has monitoring hardware into complex Data Analytics Management platform. With the number rapidly established itself as the world’s • SoCs to enable ‘fab-to-field’ analytics of IoT devices expected to approach leading provider of onboard infotainment • CX capabilities, designed to accelerate silicon 75bn by 2025, Everbridge’s Critical for public transport. However, with so • Logistics / Supply chain bring-up, optimise product performance,

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Event Management platform enables Charlesbank and TA Associates onto model. During ECI’s involvement, Arkessa organisations to utilise vast amounts of its share register last year. In June The horse has not only acquired Netherlands-based Sim Services electronic data, including IoT sensors, to they acquired Boldon James a data “ in August 2020. digitally transform how they manage the classification and secure messaging bolted but the barn door has Reading-based Ascent Software has safety and security of their assets. It might solutions business, from defence business been left swinging acquired Purepoint, a London-based have been useful on Capitol Hill recently! Qinetiq. It was acquired for £30m which ” software development provider focused on is a reasonable sounding 3.3x revenues the IoT market. At 1.5x 2020’s estimated and is actually similar to the amount that Historically, UK Regulators have adopted a revenues, the multiples look quite low. Qinetiq paid 13 years ago. In March, Accenture is hungry, fairly liberal approach to Tech-based M&A Purepoint CEO Alex James, who founded “ HelpSystems also acquired penetration gobbling up another 28 activity, waving through major sales such the IoT business in 2011, has built it to over testing software platform Cobalt Strike as ARM without too much delay, although 25 people and joins Ascent as group CTO. companies in 2020 to expand the company’s cybersecurity UK regulators have belatedly taken an It is another PE-backed buy-and-build ” business. Cobalt Strike describes their interest in the ARM deal. Inevitably it of a relatively small business with sector business as threat emulation software, may slow down deals in certain sensitive specialism. Horizon Capital invested in In March, Accenture acquired Context executing targeted attacks against sectors, and it may make it tougher to do Ascent, a provider of custom software Information Security, a UK-based enterprises with ‘one of the most powerful some cross-border trade deals with exotic development enabling digital transformation, cybersecurity consultancy from its parent network attack kits available to penetration buyers, but shouldn’t impact many US/UK in November 2019, backing CEO Stewart company Babcock International Group. testers. This is not compliance testing’. deals or private equity buyers. Smythe (ex Adapt which was acquired by Context was founded in 1998 and has its HelpSystems has been steadily beefing up Rackspace) in a £30m transaction. HQ in London. Babcock acquired Context its cybersecurity presence acquiring two back in 2013 for £32m which equated to companies last year – including Reading- a heady 3x revenues back then and is still based data loss prevention (DLP) provider pretty high for a consulting business. They ClearSwift (from RUAG). IoT / AI and Thingalytics. Is that a thing? offer high-end cyber defence, intelligence, “ ” Increased UK Government regulation over vulnerability research and incident Machine Learning M&A activity in sensitive industries is set response services. Babcock sold Context to increase. Legislation will enable the UK In June, US listed Keysight Technologies for £107m (4x revenues) making a chunky Cognizant acquired Inawisdom, an Ipswich Government to review mergers involving acquired Eggplant, a software test profit. Having grown to 250 staff at £0.4m based AI and data analytics consultancy foreign buyers in three sectors considered automation platform provider that uses per member of staff, it was no bargain and just before Christmas. Cognizant had a busy to be central to national security: artificial intelligence (AI) and analytics to equates to an EBIT multiple of about 50x. time acquiring nine companies in 2020 and, despite their huge size, acquired Inawisdom automate test creation and execution. It was • Artificial intelligence (AI), Accenture is an acquisition machine and which has just 60 staff and £10m revenues. acquired from The Carlyle Group for $330m • Cryptographic authentication acquired an impressive 28 companies in They are growing rapidly but importantly which equates to a very attractive sounding • Advanced materials 2020 (24 in 2019) including Symantec’s have their own Rapid Analytics and Machine 9x revenues. London headquartered Cyber Security Services business bought The thresholds are very low with revenues Learning platform (RAMP), based on AWS. Eggplant was founded by John Bates for $200m, adding 300 staff (or equivalent of £1m and/or market share of 25%. Such who might know a thing or two about IoT to £0.5m per member of staff). Although a move is understandable (particularly IoT connectivity provider Arkessa was having written the book ‘Thingalytics: Accenture has revenues of $30bn it as relationships with China/Russia cool). sold to Wireless Logic in December, Smart Big Data Analytics for The Internet continues to acquire smaller digital However, after the wave of foreign buyers giving ECI a 2.1x return in two years. of Things’. Eggplant enables organisations consultancies with 50-100 staff to increase shopping in the UK over the past decade, Arkessa offers world-wide, world-class to test, monitor, analyse, and report on the exposure to the digital economy. there is a feeling that the horse has not cellular connectivity services that make it quality and responsiveness of software only bolted but the barn door has been left easy to design, deploy and manage IoT applications across different interfaces, HelpSystems has been an increasingly swinging! devices securely, efficiently, and at scale, platforms, browsers and devices, including aggressive acquirer since it took regardless of application or business mobile, IoT, desktop, and mainframe.

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In June RWS Holdings (IP support process improvement and overall innovation services provider that addresses the IT (2020). ScholarPack and Arbor service services and localisation) acquired comes from business end users”. Build bot skills gap by finding, training and placing over 2,000 schools and have built scale Iconic Translation Machines and and automate, simples. job-ready technology talent in roles with rapidly in a fast-consolidating sector. Webdunia for up to $41m of which $10m leading corporations worldwide. Valuation Civica announced the acquisition of digital is deferred. Iconic is based in Dublin and was a healthy 3x revenues. “Wiley is learning management specialist Agylia. specialises in developing neural machine committed to bridging the gap between West Country-based, Agylia may be pretty translation (NMT) solutions. It uses education output and industry need,” said small with circa 50 employees but it has machine translation (MT) and artificial EdTech Brian Napack, President and CEO of Wiley. an impressive client list including Health intelligence (AI) in the application of With schools and universities everywhere Education England, National Grid and language technology. Iconic was valued at being forced to move online, it has Microsoft. The Learning Management 8-16x revenues, depending on earn-out. significantly accelerated the move to Big consolidation in EdTech System enables the delivery of both digital Webdunia a translations services business “ ” remote learning and attracted M&A and blended learning and mobile apps. was valued at only 1.5x revenues, as it is activity as providers tussle to gain an There would seem to be good synergy with more of a translation services business. Horizon Capital created Juniper Education edge. As a result, we have seen a wave of a newly launched product to support a Not content with that, shortly afterwards when it acquired EES for Schools as a consolidation: mobile workforce of carers with videos and RWS acquired SDL in a large share-based buy-and-build platform investment in July podcasts given Civicas deep relationships deal worth £809m (around 2x revenues). has sold its Education Software 2019. It is in a hurry, having previously Capita in the Heath sector. Civica also acquired The lowish valuation on SDL reflects its Solutions (ESS) business to Montagu tucked in OTrack, Classroom Monitor Equiniti’s HR and payroll business which bigger services element – for example they for up to £400m, which is and Maze Education, all of which provide Private Equity should add £6m revenue and £1.7m to its own Donnelly Language Schools. approximately 4x revenues, as it continues analytics platforms to help schools track 2020 EBITDA. its clear out. Some had expected the price pupil progress. In 2020 they acquired to be higher but, as Jon Lewis, Capita’s school management information system IRIS Software acquired school Build bot and Chief Executive Officer, said: “ESS is a (MIS) and pupil analytics provider Pupil management system provider iSAMS “ business that Capita originally bought for Asset and then in September announced which supports core school functions automate, simples ” £10m so we have created significant value the acquisition of FS4S, which provides including admissions, academic reporting over 25 years of ownership.” Good point schools, academies and trusts with finance, and tracking, examinations, wellbeing, Jon. The SIMS management information payroll and HR management services. communication, HR, fee billing and In May Microsoft acquired London based system has apparently struggled to Juniper then acquired SISRA, a specialist accounting in over 1,000 schools. Robotic Process Automation (RPA) software develop its Cloud-based proposition. in data analytics for over 1,650 secondary provider Softomotive from investor Grafton Nonetheless, it has a massive market schools, academies and trusts. Its analytics Capital, which only invested less than two share of nearly 75%. It is facing increasing are used to evaluate exam performance. years ago. Softomotive has developed competition from Cloud-based offerings, With the huge disruption to schools and WinAutomate which helps more than 9,000 and the big consolidation that is happening students in 2020 due to COVID-19 these Human Capital customers automate business processes in the sector driven by M&A deals (see analytics will be in strong demand. Management Tech across legacy and modern desktop below). Interestingly, Montagu also bought The Key claims it is now the second largest applications. Together with Microsoft’s which focuses on school ParentPay provider of MIS to schools in England, Advanced acquired employee Power Automate, WinAutomation will payments, income management, parental overtaking RM, but it is still a long way engagement software Clear Review. provide customers additional options engagement and cashless catering. The behind Capita’s old division ESS. The Key Founded in 2016 by Sony’s former for RPA desktop authoring, so anyone synergies between the two are clear under International HR Director Stuart acquired MIS provider Arbor Education can build a bot and automate Windows- owners with deep pockets. which was founded in 2011 by James Hearn, Clear Review has a Continuous based tasks. As CEO Marios Stavropoulos Performance Management platform that is US-listed John Wiley acquired mthree Weatherill and Emile Axelrad. The Key explained: “Since less than two percent tailored for a remote working environment from ECI Partners for £98m. mthree is have already acquired WebBased (2016), of the world population can write code, to engage and support workforces a rapidly growing (20%pa) education ScholarPack (2018) and GovernorHub we believe the greatest potential for both

TECH M&A REVIEW 24 25 TOP UK BUYERS SINCE JAN 2018 wherever they are. Its Cloud HR solution max of 7.4x ARR and a punchy 33x EBITDA now supports the entire employee lifecycle but they are also growing rapidly. ELMOs ClearCourse – 22 from recruitment to retirement. M&A team is on fire but the shares are “ pretty flat in the past three years. a clear winner Advanced also acquired £24m revenue ” 19 workforce management software specialist In other deals, Allocate Software acquired Mitrefinch from LDC. Established way back Lincoln-based Selenity, which provides ClearCourse Partnership 12 in 1979, Mitrefinch provides products across Cloud-based HR and finance process is the most acquisitive T&A, payroll, HR and access control with management software, in particular to company in UK, and to be analytic capability. The company supports health and care organisations. In July honest it’s difficult to keep 10 4,400 customers enabling them to increase Field Service Management Software up with the number of deals productivity and manage their workforce company Totalmobile acquired both Lone they have done. Backed by 9 effectively. Mitrefinch helps organisations Worker Solutions (LWS) and Software US-based Aquiline Partners, spend their time on what matters most. Enterprises (known as Global Rostering their target companies are Gordon Wilson, CEO of Advanced System (GRS)). LWS provides access to focused on membership commented: “Digital technology provides safety alerts, status updates and locational organisations and they help accuracy of data to enable rapid decision- information to support staff who are their customers to manage their members making in shifting market conditions which operating in high risk environments or and administer their business workflow. is a vital tool for companies managing shift undertaking sensitive activities, customers The plan is to automate and monetise Information patterns and measuring critical output.” include Network Rail, Mitie and Centrica. their payment processes too. In 2020 Management deals included: Felinesoft (Microsoft software development) and Hart Square Digitisation and the explosion of data from ELMO’s on fire (CRM consultancy), Assisi (vet practice IoT, AI and ML has created strong demand “ ” management), FLG a CRM provider for for data intelligence solutions to capture, Cloud Software SMEs, Swan (retail management) and analyse and visualise huge amounts of Australian listed ELMO Software acquired Garage Data Systems (workshops). That information. This has created another Swedish based Hexagon AB acquired Breathe for a total of £22 million; an initial takes deals closed to 22 in two years, nearly wave of M&A activity and consolidation. Farnham based , a provider £18m in cash and shares plus an earnout CAEfatigue one a month. Impressive, and we see no fall Examples of key deals were: of mechanical fatigue simulation for an additional £4m. Breathe develops in their appetite. solutions used to improve manufacturing In August BAE Systems strengthened and sells HR software to SMEs. It has more product design, quality, and reliability. its technology and data portfolio, buying than 6,700 customers and targets the Fatigue analysis of a digital twin enables Techmodal, a Bristol-based data market direct and through HR Consultants. manufacturers and engineers to predict in- The Top 5 UK acquirers consultancy and digital services company. It recently launched a rota management service durability and improve quality before “ With 120 employees and 30 associates, solution to help small business juggling are all PE backed production starts. Its solutions are used by it has contracts with the MOD in support the challenges posed by COVID-19. The ” global manufacturers across automotive of the UK’s armed forces, particularly the valuation is a significant 6x revenues but and aerospace and are interoperable Army, Strategic Command and Royal Navy. reflects the highly recurrent income and Jonas has been quietly acquiring with leading computer-aided engineering Its services include the Data Integration 30% growth rate. companies for a number of years. Owned (CAE) packages. Hexagon President and Platform to view, manage and exploit data by Constellation the business focuses on Late in December ELMO also acquired CEO Ola Rollén said: “Not only do these provided by multiple systems on aircraft verticals, particularly in public sector. It Oxford based Webexpenses, (Cloud- technologies provide a valuable addition to carriers. has now made 100 acquisitions in total. based expense management) for £20m our Smart Factory solutions portfolio, but In 2020, in the UK, it acquired Bluestar In July, Qinetiq acquired Manchester based in a mix of cash shares and earn out. They they also enhance our portfolio of Smart (blue light software), and Contronics (lab Naimuri (agile Cloud-based services and focus on the mid-market. ELMO paid a Industrial Facility solutions”. monitoring). technology to the UK Intelligence and Law

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Enforcement communities). At a cost of of the industrial software supplier is now a portfolio of web content but still owns as people stay home, but it is an ambitious £25m it is 2.8x revenues (12x profits). The approaching 10x revenues. It made a PC Gamer, Homes and Gardens and Golf expansion programme. Have they bitten off deal comes just a month after they sold big move in August buying out Softbank Monthly. CEO, Zillah Byng-Thorne has more than they can chew? Boldon James, a data classification and and paying a chunky 10x revenues for overseen a period of significant growth HUT Group only listed in September but secure messaging solutions business to OSIsoft, a real-time industrial operational including the £140m acquisition of TI made a significant move in December, HelpSystems. It was acquired for £30m data software supplier at a cost of $5bn. Media (titles like Country Life and Cycling acquiring Dermstore a US skin care online which is a reasonable sounding 3.3x OSIsoft is a data driven business that Weekly) in April. In November she launched retailer, and two smaller nutrition suppliers revenues and is actually similar to the makes software that captures data from a £594m bid for price comparison site for a chunky $430m. Dermstore was amount that Qinetiq paid 13 years ago. ships, chemical boilers, power plants and GoCo and perhaps its no surprise that the acquired at 2x revenues and increases other facilities in industries including oil and deal is 75% payable in shares when the its US market share for the fast-growing gas, mining, pulp and paper and water. “It Future share price has nearly doubled from online retailer. “RELX and Aveva pay will accelerate the Enlarged Group’s role in low in March and is valued at 8x revenues 10x revenues the digitisation of the industrial world, which - almost double GoCo’s valuation. Zillah ” is being driven by a need for sustainability, aims to provide ‘complementary insights Pretty good timing the industrial internet of things, Cloud, data that enable consumers to make informed “ ” RELX is re-inventing itself from a publisher visualisation and artificial intelligence,” choices in their passions, interests and key to a business and data information and Aveva’s CEO Craig Hayman said. purchasing decisions’. It’s a big move and Boohoo (online fashion retailer) was analytics provider through a series of re-invents Future, but shareholders seem Geospatial information provider Envitia having a terrific lockdown and its shares chunky and mainly US acquisitions. It sold less convinced looking at the recent fall in has completed MBO to Maven valuing it bounced strongly having more than Farmers Weekly, its last remaining trade its share price. at circa 2x revenues. It has been around doubled since March, although things then magazine in 2019. In 1H20 they acquired for 30 years so is certainly well established Feedr (meal delivery to office workers) soured a little with supply chain issues, Arizona-based Emailage (fraud prevention) with large defence clients and an ambitious has been acquired by Compass Group showing that timing is everything. Taking for $480m and paid $375m to buy San growth agenda to expand into new sectors for a rumoured $24m to use the platform advantage of the high shares, they raised Diego-based ID Analytics, adding to its and further develop its data discovery to serve its own corporate client base. more equity and tidied up their structure earlier $817m deal for ThreatMetrix (digital platform using AI and Machine Learning. It was valued at just £2.8m prior to a by acquiring the remaining 33% of Pretty identity). Using machine learning, its own crowdfunding round in June 2018. So it’s Little Thing for £330m from founder data and its network of partner companies, a great price but lockdown would not have Umar Kamani, valuing it at £1bn. That Emailage can predict fraud using email been good for Feedr’s business. compares with the valuation of just £5m addresses and online identities, while when Boohoo bought its original 66% of ThreatMetrix tracks around 1.2bn people eCommerce PrettyLittleThing back in 2014. Pretty nice. worldwide, looking at digital patterns to assess risks. In August RELX also Admiral sold confused.com and other “Just Eat – have they bitten added SciBite, a semantic AI company assets to ZPG in a £500m cash deal that off more than they can chew? headquartered in Cambridge, which helps accelerates ZPG’s consolidation of the ” life science customers make faster, more sector, having acquired both Zoopla and Communications effective R&D decisions through advanced USwitch. The valuation was a chunky at Just Eat Takeaway.com was formed with text and data intelligence solutions. It’s 19x profits or 4x revenues and is another In December, US-based acquired an all-share merger of UK based Just Eat Dubber a business that’s not shy in paying up for restructuring as Admiral refocuses on UK mobile recording business for with Dutch based Takeaway.com for £10bn Speik targets, having paid £65m, which is over 10x its core insurance business. Given the £20m or nearly 3x revenues. Speik is a in January 2020. Then, in June, it acquired revenues for SciBite. impending FCA drive to end price walking leading provider of PCI compliance and Grubhub, the US based online food delivery it’s potentially a good time to exit. call recording solutions and is a merger of Aveva shares have doubled since the operator, for $7.3bn in shares to create a Voxygen and Aeriandi. Aeriandi offers PCI start of 2019 and are now valued at just Future PLC, the UK listed media business global online food delivery giant. That’s compliance solutions, in conjunction with shy of £8bn. As a result, the valuation has evolved from computer magazines to tremendous timing given the COVID-19 crisis

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Gamma and Vodafone. Voxygen supplied on a path to an increasingly cloud-native having been demerged from Carphone markets for over 40 years. The valuation of hardware recording solutions to O2 future”. The 800-strong team will help Warehouse, and having earlier acquired 5x revenues or 15x estimated 2020 EBITDA amongst others. Microsoft’s push into Cloud telephony. Tiscali and Pipex to build scale. It is yet reduces to 12x when adjusted for the tax COVID-19 had minimal impact on another privatised UK company falling to benefit. The Radios business was expected Also in December, UK-listed Halma Microsoft’s performance; it delivered overseas PE investors. In 2020, TalkTalk to generate revenue of approximately acquired Wolverhampton-based Static revenue growth of 15% in their Q3. Its sold FibreNation to Goldman Sachs $125mso valuation is a lot lower at nearer Systems for £37m or nearly 2x revenues. commercial Cloud arm, including Azure, backed CityFibre Infrastructure for £200m. 2x revenues. It has strong growth potential It is a designer, manufacturer and installer Office 365, Dynamics, was up 39%. If CityFibre has ambitions to challenge underpinned by US Department of Defense of critical communication systems, the likes of Openreach and Virgin Media and NATO mandates for cryptographic and which enables hospital patients to alert nationwide, then this will be a useful anti-jamming modernisation of software healthcare specialists in an emergency. Microsoft pushes deeper into addition of scale on that journey. However, defined radios. US-listed Affluence acquired Nottingham “ Harrogate, Ripon, Knaresborough and based Flexiscale and its platform Flexiant Cloud telephony” Dewsbury are not the heartbeat of the in June. As James Honan, Jr. Affluence’s nation’s fibre network. Good timing though, Cloud communications is hot CEO explained: “Flexiant is a leading as the demand for home broadband in “ ” Cloud orchestration business and provides In February US-listed Medallia (CX lockdown must have jumped. solutions aimed solely at helping (telco) management), acquired Liverpool based Cisco acquired UK-listed Cloud Wiltshire-based Vysiion Group has service providers capture the Cloud LivingLens for £20m. The video feedback communications provider IMImobile been acquired by Exponential-e. The market opportunity”. Rajinder Basi, CEO platform is high growth and interesting as it for £543m. Its Cloud communications communications infrastructure and of Flexiant said: “We believe that the ‘humanises feedback and brings the voice platform is a CX provider helping outsourced IT service provider has been Flexiscale technology will change the of the customer and employee to life’. businesses to communicate with their taken over by Exponential-e, a Cloud, datacentre paradigm as we know it today. customers on mobile/WhatsApp and LivingLens gives businesses insight into network and unified communications The technology is based on our nano similar platforms; reaching beyond the customers’ and employees’ feelings, company. The deal sees the exit of BGF – nodes which enables the mass reduction contact centre and traditional routes which wants and needs. “Video feedback is which invested £4m in 2015 and returned in footprint so the datacentre can exist in is increasingly important in a fragmented one of the most powerful innovations in over 3x their investment. Founder Bruce a Nano-Cloud at the tower base station remote workplace. Valuation is 3.4x experience management today. Video Brain said: “The business is well placed to or be expanded to create micro-Clouds revenues and is yet another cross-border brings 6x more feedback signals than text further build upon its strategy of utilising or metro-Clouds by stringing multiple acquisition depleting the stock of sizeable responses,” said Carl Wong, CEO. With its strong reputation within the utilities nodes together using Flexiant, our edge UK listed tech companies. Shareholders 3.5bn smartphone users and 54% of all market of delivering and supporting Critical orchestration software”. Leading edge. will be happy as the shares jumped nearly mobile brand experiences being video and National Infrastructure (CNI)”. Patience 50% on the announcement. image-based it is clearly a big potential is sometimes a handy attribute and it market. Then, in April, Medallia completed certainly was here as Bruce Brain started In a similar vein, MessageBird, the $3bn Nano clouds in Nottingham the circle by acquiring the US speech-to- Vysiion way back in 1971, which was the omnichannel Cloud communications “ ” text platform, Voci Technologies. Voci’s year the microprocessor was invented and platform acquired London-based real- artificial intelligence (AI) and deep learning the first pocket calculator was released by time web technologies company Pusher capabilities used by contact centres Texas Instruments. for £26m or a very similar valuation to Microsoft acquired London based provides feedback from customer calls IMImobile at 3.3x revenues. Its focus is Metaswitch Networks a virtualisation BAE Systems acquired Collins Aerospace’s including emotion, sentiment and voice on in-app notifications and a developer- provider for telcos which has heavyweight Military GPS business for $1.9bn and biometric identity. friendly API and SDKs built around ‘push’, investors such as Sequoia and Francisco. Raytheon’s Airborne Tactical Radios for Facebook Messenger, WhatsApp, Line As Microsoft explained: “As the industry UK-listed TalkTalk Telecom agreed a business for $275m. The GPS business and WeChat. The company has delivered moves to 5G, operators will have £1.5bn exit to PE group Tosca and others is the leading provider of mission critical over 18 trillion messages across thousands opportunities to advance the virtualisation at a 26% premium to its share price or military GPS receiver solutions and has of apps for its customers. of their core networks and move forward 1.4x revenues. It has a colourful history been a pioneer in US military GPS receiver

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365, and Dynamics 365. It follows their track their digital transformation by helping Microsoft-focused systems integrator acquisition of London-based Contino them transition from legacy telephone Avanade upped its acquisitions with the ICT Managed (DevOps and Cloud transformation systems to Cloud based Microsoft Teams purchase of Concert, a Milan-based Services specialists) at the end of 2019. They are telephony. It has also developed an exciting Microsoft Dynamics 365 and AX solutions one of the most aggressive acquirors of multi-tenant Microsoft Teams PSTN routing provider. This is the company’s third With the acceleration of digital 2020. In September they also acquired platform, Cloud UCX™, enabling customers acquisition recently, compared with just transformation, the managed service Chicago-based 10th Magnitude, a Cloud to use the public telephone network direct five in the preceding six years. Other deals sector is very much at the forefront of the specialist focused exclusively on the from Teams. Scott Millar, Chief Executive include Altius (data and AI solutions) and convergence between IT and Telecoms. Microsoft AzureCloud computing platform. of Exactive, commented: “Maximising the German Alnamic, (Microsoft Dynamics With the forced adoption of IP telephony our shareholder value was important, 365). In June Wipro acquired Belgium-based in lockdown, convergence is accelerating but getting the right cultural fit was also 4C – the largest independent Salesforce rapidly. As a result, Telecoms Service very important to us as owner/managers. Platinum Partner in EMEA. Wipro paid suppliers are seeking IT skills and vice Gamma ticked all the boxes”. Exactive €68m for the 350-employee business, Digital transformation versa. A wave of PE owned consolidators is one of the few independent Teams “ which was 2.2x revenues. accelerated are also expanding aggressively with specialists (or was). It looks to have been a ” almost all the mid-tier PE houses backing There is, without doubt, a lot of PE backed well-timed deal from Gamma. portfolio companies to buy-and-build. buy-and-build activity using platform Another example of strong demand Examples include: ECI/ITLab, Mayfair/ businesses. So, with demand being high it AIM listed and digitally native tech group for Microsoft skills was the IT Lab (now GCI, Inflexion/Ridgewall, LDC/Babble and is no surprise that some are going a level The Panoply Holdings (TPH) is starting ContentandCloud) acquisition of leading Horizon/Timico. down looking for smaller fish. For example, to live up to its name. Panoply means Azure specialist, Sol-Tec, which is public LDC has funded a three-way £30million ‘an extensive or impressive collection’. In January Arrow Business Comms took sector focused and counts the DWP, merger to form Kerv - a next-generation Although not all of its deals are that additional funding from MML and a £50m HMRC and the DoE among its customers ‘customer-first, Cloud-first’ managed impressive - Pontypool based technology acquisition pot. They are not hanging with revenues of £9m (down 9%). Nik services provider. DoubleEdge, Foehn and services business Arthurly was acquired around having acquired Altinet, a Leeds- Topham, CEO and founder of Sol-Tec Metaphor IT are all delivering double-digit in June for a max of just £1.5m (and only based provider of IT security and storage commented: “IT Lab was the natural home growth rates and now form yet another £0.41m upfront) - it has now made 11 services in July. for Sol-Tec, with its dedicated focus on buy-and-build platform. acquisitions in its short life. So, it’s fair to Microsoft and the deep expertise already In August Onecom, a business say it’s becoming increasingly ‘extensive’. established across Modern Workplace and telecommunications provider backed by LDC Dynamics 365”. Since getting investment TPH further added to the collection, buying and Ares, acquired Glamorgan Telecom Big demand for Microsoft from ECI in 2016, IT Lab has completed business change consultancy Ameo for Group broadening its geographic footprint. “ Teams specialists four acquisitions, including SMB specialist, a total of £7m in April. That equates to 1x Deloitte acquired SAP-centric consultancy ” Mirus, in 2019 and leading Microsoft revenue or 7x EBIT in another part cash and and product provider Keytree, who have Office365 and SharePoint partner, Content shares deal. It also acquired healthcare- secured significant digital transformation and Code, in September 2018. Revenues focused digital transformation consultancy Gamma Telecoms acquired Exactive contracts. It follows EY’s acquisition at end are now around £85m. IT Lab is one of the Difrent in September for an initial (a fast growth Scottish based provider of of 2019 of Oxford-based AgilityWorks, a very few partners able to provide services consideration of £8.8m. Payable nearly half Microsoft-focused Unified Communications consulting business that specialises in the to its clients across all three elements of in cash and shares it equates to just over 1x solutions) just before lockdown for around deployment of HANA based SAP technology. Microsoft’s Cloud, Office 365 and Modern revenues and an EBIT multiple of 10 - but 2x revenues. Given the huge boost in video Workplace; Azure and Dynamics 365. To these multiples can rise by 50% if earn out Cognizant has acquired Microsoft public conference calls in the past few months re-enforce the message, IT Lab has since targets are met in the next two years. Cloud specialist, New Signature which as the world works from home, the timing changed its name to the slightly clunky has 500 Cloud experts from the UK, the of the purchase couldn’t have been much Computacenter has started a steady sounding ContentandCloud. US and Canada offering across Microsoft’s better. Exactive helps customers to fast- overseas push. In 2018 it bought San business Clouds: Azure, Microsoft

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Francisco based, FusionStorm, (Sourcing Arkphire for $140m which equates to a not and consultancy company headquartered which sounds really high for a consulting and Professional Managed Services) for very exciting sounding 0.7x revenues. That in London. Through adoption of AI and business. $70m plus an additional $20m depending valuation perhaps reflects its IT services API technologies from Google and Twilio, on profit levels. That was followed by a nature which is aimed at supporting the EU DVELP offers solutions in customer service Dutch business called Misco Solutions, a IT needs of US Tech companies. automation. Computer Games value-added reseller and service provider LDC exited Babble in a management Timico, which is owned by Horizon, bought which had revenue of €134m. In 2019 buyout to Graphite which values the unified Arcus Cloud Services (ACS), the Amazon they acquired Pathworks in Switzerland, communications and cyber security Web Services public sector consulting (a tiddler) and in March 2020 announced Competitive tension drives services provider at £90m. LDC supported firm. ACS is a Cambridge-based Cloud their intention to acquire BT France “ six acquisitions in six years jump-starting the native organisation focusing on public up value at Codemasters which has circa £200m in revenues. growth. Babble provides unified technology sector organisations and has been an AWS ” Computacenter is a beneficiary of digital solutions for more than 2,000 small and partner since 2011, previously part of the transformation and despite COVID -19 its mid-sized businesses. The company’s wider Arcus Global business. Managing The power of competitive tension was shares have made a strong recovery. services include hosted telephony (VOIP), Partner, Simon Hitchcock, at Horizon shown by the sale of Codemasters, the Sovereign Capital funded the acquisition communications, cloud contact centres, Capital, said: “ACS is the third acquisition UK-listed games developer who agreed of AIM listed Murgitroyd Group for £65m. mobile and enterprise connectivity. we have made with Timico since our a cash and shares deal with TakeTwo The management team, led by Edward In June they acquired Lancashire- investment. This acquisition is a key for 528p a share. However, as we have Murgitroyd, CEO, aims to deliver a greater based communications provider Lake enabler to creating a market leader in the regularly seen in practice, the best offer global presence through a strategy of Technologies, then in August they acquired digital transformation market”. is rarely the first. This spurred a rival bid of buy-and-build. That sounds familiar. The Corporate Management Telecom which £940m from Electronic Arts is 14% higher. Group delivers patent and trademark was established back in 1998 and based in Codemasters is best known for its racing legal advice together with a breadth of IP Braintree. Be Heard goes quietly games, including the Dirt Rally series and support services to meet the IP needs of Formula 1. Japanese raids on UK companies are “ ” its international client base. Established in infrequent although notably NEC acquired Nordic development and publishing group 1975 in Glasgow by Edward’s father, the Northgate not that long ago. Ricoh is a Thunderful acquired Shadow Point and business has grown to 300 staff and sold MSQ Partners (which is backed by LDC) name associated with image and printing. It Phogs! developer Coatsink Software for a lowish 1.4x revenues. acquired UK-listed Be Heard PLC for an is moving increasingly into services having for an initial £23m, half in cash and half EV of £20m, which is just 0.4x revenue. London headquartered ECS was acquired acquired two IT service businesses in in shares. They are currently working on Given the low valuation, it looked cheeky by Global Logic, a US group owned and Europe earlier in 2020. They also acquired projects including Jurassic World Aftermath but the business would have taken a funded by CPP Investment Board and Godalming-based IT services provider, and Transformers Battlegrounds, among hit from COVID. Also, Be Heard shares Partners Group. ECS has circa £75m MTI Technology which haa revenues of others. A punchy earn-out of £42.5m haven’t made much noise recently! They in revenue and has numerous large circa £90m and focuses on cyber security, will also be paid out if Coatsink exceeds have been on a five year downward trend customers in financial services and other datacentre and managed services. its financial targets for 2021 and 2022. after an acquisition spree a few years back. highly regulated sectors. Interestingly, it Thunderful, owns other studios and Sabio Group snapped up its fourth is an Amazon Web Services / Advanced In a strange move Jacobs Engineering publishers including Rising Star Games, customer experience services firm of Consulting / Managed Services / DevOps (which as the name suggests is a US Image & Form, and Zoink. 2020, UK-headquartered Genesys Partner, and one of only three EMEA engineering services business) bought specialist Anana, with over 100 employees. Amazon Connect Service Delivery Partners. 65% of PA Consulting valuing it at a It is a Genesys Partner with a range of CX chunky £1.8bn. They are buying out Carlyle US based Presidio was acquired for solutions and services. Sabio had already Group who acquired 51% back in 2015 $2.1bn in 2019 by BC Partners. Focused acquired two Genesys partners in 2020 in for £600m, so are making a tasty profit. on digital infrastructure, Cloud and security France and Spain. In March, Sabio also The valuation equates to 3.6x revenue solutions, it has acquired Dublin based bought DVELP, a Cloud software product

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has a competitive advantage. The market shift to cashless payments, a big drop in UK Listed Tech clearly agrees as it trades 10x revenues. consumer spending has dealt a serious Risers blow to its revenue through retailers. Kainos Group (59%) once again posted The acquisition of an African payments Companies ITM Power (+555%) shares were among impressive results (30% revenue growth). business with alleged links to Wirecard the best-performing in UK market, rising The profitable, high growth, leading partner didn’t help either. Rising & Falling over 6x and now valued at £2.5bn. of Workday (HCM software suite), now Revenues are still small (£5m) but its trades at 7.5x revenues. Far from cheap. PayPoint (-35%) is both losing key Stars – 2020 electrolysers, which are a low carbon way customers like British Gas and facing to produce hydrogen, have significant COVID headwinds with many retailers potential in decarbonising power in the closed and ATMs significantly down as not-too-distant future, so is a good play contactless payment accelerates. An on the green agenda. It has a three year Fallers Ofgem enquiry has also not helped. ITM POWER forward P/EBITDA of 226x. Finablr (-94%) (which owns Travelex) has The Sage Group (-21%) investors had a Xaar (235%) shareholders will be glad not traded since March 2020 and may be bad year. The FTSE100 accounting software +555% this ink-jet technology business has about to be acquired by a consortium of group has a very strong balance sheet with bounced after years of decline (it is down Israeli investors. The business originally £830m in cash after the sale of parts of the 90% from 2014 levels). Investors seem announced a $100m hole in its funding, business. However, they have been a bit unphased by a 7% decline in sales and that has since risen to a whopping $1bn. slow in shifting to Cloud computing, leaving no profit in sight, as they instead are them behind the competition like Xero and Business process outsourcing firm encouraged by new branding and go- Capita QuickBooks. They plan to use the cash is still deep in restructuring mode. XAAR to-market strategy. Shares now trade at (-77%) for acquisitions in 2021 Shareholders want Revenues are down 10%. That makes it 2.4X revenues, compared to 0.48x at the dividends. Sage is trying to be a part growth four years of decreasing sales in a row. It beginning of 2020. and part income kind of stock. It’s not doing +235% has started to reduce a debt pile of £1.9bn either of them particularly well. The Panoply (137%), the IT service through quite a few significant asset sales management company, had a strong year, including its Legal arm and ESS (see making three acquisitions and seeing its above). The shares that reached £12 are FINABLR revenues jump 380%. In the spring they now 39p. CAPITA built a platform in two weeks from scratch, Micro Focus (-62%) which acquired -94% THE PANOPLY through which UK manufacturers were able -77% to work together and make much needed the rump of HPs software assets back in ventilators for the NHS. Its IPO in late 2018 2016 is still suffering from a severe case of +137% indigestion and remains highly leveraged was followed by 18 months of flat returns MICRO FOCUS DOTDIGITAL but recent positive news and analyst with chunky net debt of over $3.9bn. Further restructuring may be needed and NETWORK coverage has got investors excited. -62% INTERNATIONAL +63% a bit more focus. Recent partnership with dotDigital (63%) had another great year AWS will give investors some confidence -52% and is continuing its seven year double but at 1.7x revenues it has missed the tech digit growth track record. The Cloud-based re-rating this year. PAYPOINT marketing software business is highly KAINOS GROUP profitable and over the last five years its Network International (-52%) is another -35% return on capital employed (ROCE) has payments company to have a poor 2020. THE SAGE +59% While the pandemic has accelerated the GROUP averaged close to 25%. This suggests it -21%

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Largest US Tech M&A Deals in 2020 EV $m PURCHASER TARGET VALUATION (EV/Rev) US Tech M&A 33,600 11 . 3 revenues. With Salesforce shares bouncing Two mega deals valued back and valued at 10x revenues they can “ certainly afford some fancy valuations. at >30x revenue! 27,700 33.0 ” US M&A activity in the Tech sector remains “You snooze, you lose” 21,200 9.7 very active. Some sectors are red hot. With three of the largest deals valued at over 30x revenues, at first glance it looks Worldline continues the rapid overheated but quite a few of these deals consolidation of the payments space with 10,154 3.1 are paid for at least partly in shares and the acquisition of Ingenico, the point-of- so the risks are shared. Nonetheless sale terminal provider that controls 37% valuations look very stretched. percent of the market globally. Bought in a cash and share deal with an EV of €10.1bn, Salesforce made their largest ever 9,275 15.5 this equates to 3.1x revenue 18x EBITDA acquisition buying collaboration player and a 24% premium to its share price. The Slack for $27.7bn. At over 33x 2020’s deal highlights both the shift in payments revenues, that makes it one of the most and spending habits to more digital expensive acquisitions ever. Salesforce 8,618 10.1 platforms and the never-ending drive to CEO Marc Benioff described it as a “match gain economies of scale. It will certainly made in heaven” - the price is certainly create scale in a move that will create the heavenly. They are paying a mix of about world’s fourth largest payments company 7,500 15.0 60% cash and the rest in Salesforce with net revenues of around €5.3bn. shares. The Slack platform that includes The other big payments deal in 2020 to video conferencing, messaging, file mention was the all-European affair with sharing and workflow does seem a good Italian Nexi buying Danish based Nets. The 5,000 5.0 fit and will have benefited from Covid but is all-share deal values Nets at $8.6bn. Nexi some way behind Microsoft Teams which Chief Executive Officer Paolo Bertoluzzo has now reached 115m Daily Active Users - has rapidly expanded the company a rise of about 4x since pre-Covid. through acquisitions, announcing the deal 5,000 3.5 (health) Salesforce has paid some eye watering only days after agreeing to the milestone valuations in the past few years. In 2019 acquisition of Italy’s SIA for €4.6bn. it paid $16bn for Tableau Software, Clearly, he’s a man in a hurry, but with the (data analytics software), for 13x and the wave of consolidation in payments it’s clear 3,940 10.5 year before the business paid $6bn for that if you snooze you lose. Mulesoft, (data integration platform) or Whilst the Ingenico and Nexi deals 22x revenues. Earlier in 2020 Salesforce grabbed the headlines, the biggest news in also acquired for $1.2bn or just 7.5x 3,200 32.0 Vlocity

TECH M&A REVIEW 38 39 the sector must be the demise of Wirecard said Jeff Lawson, co-founder and CEO pandemic. In fact, CEO Satya Nadella quarter ever was 3Q20! The second half which went from being one of the largest of Twilio. Customer engagement is hot. said: “We have seen two years’ worth of 2020 saw 75 mega deals – that is a rise technology groups in Europe worth €13bn, Twilio previously bought SendGrid for of digital transformation in two months”. of 30% YoY. A clear demonstration that to insolvency in a week or two. Somehow $2bn billion to add email to its range of Teams users are up almost 10x in a year buyer confidence has bounced back very the auditors EY forgot to check that €1.9bn communications tools. and a bit and is the glue that keeps many strongly after a pause in lockdown and of cash in the bank was actually there! The businesses functioning in lockdown. It is another indication of what can be done cash may not exist and Wirecard does not why Microsoft is now worth $1.6trn but 30x working from home. exist. It looks like fraud on an Enron scale. Customer engagement is hot PE is not that high in current market. The other big story was that Ant Financial “ ” It is boomtime again for mega deals. (which runs Alibaba’s mobile wallet, There were 38 mega (>$1bn) Tech M&A Alipay), failed to IPO following Jack Ma’s Thoma Bravo bought Flexera again. deals globally in 4Q, which is a record falling out with Beijing officials – maybe in They paid $2.8bn buying the IT asset in a quarter. In fact, the second-best trying to raise $37bn Jack was just a tad Record number of management company from previous “ too greedy. He has gone AWOL. megadeals in 2H owners TA Associates and Ontario ” Teachers’. They originally bought Flexera way back in 2008 from Macrovision for just DEALS VALUED AT > $1BN Plaid (nearly) sells for $200 million and sold it in 2011 for $1bn “ 120 impressive 35x revenues more. Flexera is positioned for ‘sustained ” growth by focusing on the strategic challenges enterprises face with complex IT infrastructures.’ Acquisitions have been 100 Payments giant Visa nearly bought Silicon a key component of their growth to date Valley start-up Plaid for $4.9bn, which is having acquired 12 companies so far. over 35x current revenues. Unfortunately Microsoft acquired ZeniMax Media, the regulators had other ideas and the deal 80 parent company of Bethesda Softworks, was scuppered. the game developer and publisher and There has been massive disruption/ creators The Elder Scrolls and Fallout consolidation taking place in the payments among many others. Under the terms 60 Q4 space as shown by the acquisition of of the agreement, Microsoft will acquire Worldpay by FNIS for £43bn 11x revenues, ZeniMax Media for $7.5bn in cash and Fiserv acquiring First Data for $41.2bn or 5x circa 15x revenues. With over $130bn in 40 Q3 revenues, and Global Payments acquiring cash the outlay is a snip. Microsoft will Total Systems Services for $26.2bn or 6.4x grow from 15 to 23 creative studio teams revenues. and will be adding Bethesda’s franchises to Xbox Game Pass at a time when gaming 20 Q2 Twilio is paying $3.2bn in another one is booming as people stay at home. of these large all share deals to acquire Segment at circa 32x revenues. Segment In addition to this Microsoft also acquired Q1 lets organisations pull customer data from Massachusetts-based 5G Cloud 0 2010 2012 2014 2016 2018 2020 one app into another, by way of APIs, startup Affirmed Networks for nearly and uses its platform to better control the $1.4bn at the end of March; and IoT movement of that customer data. “Data cybersecurity startup CyberX for $165m silos destroy great customer experiences,” in May. Microsoft is a big winner from the

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Relative to the buoyant M&A markets, best ever start for large tech performance Notable IPOs in 2020 include: the number of tech IPOs remains low was Palm (remember the PalmPilot?) back Alternatives everywhere. There were very few IPOs in 2000 which was up 150%. We all know to speak of in UK in 2020 but in the US, what happened to them. Bubble Alert – Snowflake – IPOs & despite only 37 tech listings, there were “ one or two spectacular successes. 2019 valued at 150x revenues saw a few unicorn IPO flops like and ” Lyft Can $4bn cash be Private Equity Uber. Both looked over valued and as a “ result their shares have fallen. However, worth $5.5bn? Snowflake (+134% since IPO), a cloud- investors seem to have short-term ” based data warehouse platform, listed memories and in 2020 punters backed in September with a $33bn valuation. Its the listing of Zoom, Airbnb, Snowflake After Uber / Lyft – are A notable trend in the US IPO market in platform helps clients unify and analyse and Palantir with some eye watering “ 2020 was the emergence of the SPAC - large amounts of data across multiple investors being taken for valuations. Interestingly, although Airbnb an off-the-shelf financial vehicle used to Cloud platforms such as AWS and Azure and Snowflake doubled on the first day the a ride?” cut red tape on IPO, they made up 45% and visualise it with business intelligence of US IPOs. It raised $78bn in 2020 and is tools. Currently trading at 151x trailing another clear example of frothy markets revenues, it is reassuringly pricey even with US TECHNOLOGY IPOs (No.) and investor appetite for risk (UK based its impressive growth and retention rates. Paysafe recently agreed $9bn sale to a Logistics platform DoorDash (+36%) SPAC). The flip side of that argument is raised $3.4bn on IPO in December. that this funding will provide yet another

2 71 Increased demand for food delivery wave of cheap money to fund tech M&A. services during COVID-driven lockdowns SPACs have two years to spend the drove impressive 226% revenue growth money, so bubble market conditions in 2020, so timing looks good. Investors could easily continue. The largest SPAC don’t seem too worried that in a post- IPO was Bill Ackman’s Pershing Square COVID world everyone will surely want to Tontine Holdings, which raised $4bn eat out again. on IPO in July. There were rumours this vehicle would be used to take Airbnb or Airbnb (+120%) raised $3.5bn in Stripe public. To date, no deal has been December and the shares doubled done. However, this $4bn cash pile has on day one making it worth more than

145 a market cap of $5.5bn, so investors are booking.com which has 3x the revenues. putting a lot of faith (about $1.5bn of it) in Interestingly, private equity firms took part Bill’s ability to strike a deal. in a $2bn round back in April, where post 11 6 valuation was $18bn. Now the valuation Looking ahead to 2021 we could see listing stands at $82.5bn. Since that PE round, in US of SAP division Qualtrics at circa 20x revenues are down a third and losses have revenues (compared with SurveyMonkey tripled to $1.5bn, yet investors think it’s over which trades at 12x revenues) others 4x more valuable. Madness. 49 47 48 include Coinbase (Bitcoin above $30,000 45 42 44 40 19 17 37 17 17

34 will help this cryptocurrency exchange) and 12 32 29 26 27 21 23 other companies flying in the pandemic like Robinhood, Instacart and Petsmart. “Lemonade valued at 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 60x revenues”

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The InsurTech platform Lemonade Bytes (+21%) listed in UK in December 2020 TECH IPOS - MULTIPLE OF REVENUES (X) (+338%) raised $319m on IPO in July. having demerged from parent Altran and The young start-up plans to disrupt the ended the year trading on 2.3x revenues insurance industry by employing AI and is with a market cap of £802m. Bytes joins 151.0 hoping to appeal to younger customers. the ranks of Computacenter and Softcat Unlike many InsurTech start-ups they are as a listed software reseller having been a full stack insurer; they hold risks on their founded in Surrey in 1980s. Its 32% 60.0 balance sheet instead of passing them off revenue growth and 54% EBIT growth are to more established insurers. This gives impressive. them more control but is also very capital The wall of private equity funding is clearly 39.1 intensive. Investors seem to like it. It is the shown by the number of Unicorns (i.e. top performing IPO of the year. valued at more than $1bn) which have now Big data software company Palantir exceeded 500 globally, with a staggering 23.0 Technologies (+231%) raised $2.6bn on 60% of them created in the past three IPO in September at a $21bn valuation. years as young higher growth technology It currently trades at 39x revenues which companies stay in private hands longer. 20.7 suggests investors believe this company UK Unicorn additions in 2020 include will grow predictably like its SaaS peers. Cazoo (car e-commerce), Gymshark Its big data integration platform, Foundry, (e-commerce) and Hopin (internet 8.0 has long sales cycles and is heavily reliant services). on government contract wins but at least it The wave of cheap money is evident in is profitable. the UK too where £11bn was invested in 2.3 The Hut Group (+60%), provider of Technology companies last year, slightly NUMBER OF UNICORNS e-commerce solutions, was the UK’s higher than 2019, and a new record. largest IPO, raising £1.9bn in September. Despite the pandemic this reflects Revenues have grown at an impressive investors’ ongoing appetite for risk driven CAGR of 34% over the past 10 years by low interest rates. There were large fund 400 while maintaining a healthy 40% gross raisings from Resolut, Ki, Octopus Energy, profit margin. It currently trades on a fairly Oxford Nanopore and Bristol based AI chunky 8x revenues. PE firm KKR sold its chip maker Graphcore, plus seven new UK 300 stake for £448m having invested £50m 6 Unicorns were added taking the UK total to years earlier. 80. Gymshark, Gousto and Arrival joined TransferWise etc. Upcoming UK mobile payments provider, 60% of Unicorns “ 200 Fonix (+55%), raised £45m on IPO in have been created October, however no new shares were issued, and all proceeds went to the Brian Parker, Head of M&A in the past three shareholders. Revenues have doubled January 2021 years 100 since 2018 to £40m and have been ” accompanied by 15% net income margins.

2012 2013 2014 2015 2016 2017 2018 2019 2020

TECH M&A REVIEW 44 45 ICON Selected Deals

For further details contact: Brian Parker, Head of M&A SOLD TO SOLD TO SOLD TO FUNDING SOLD TO PE INVESTMENT +44 (0) 207 152 6375 [email protected] Alan Bristow, CEO +44 (0) 207 152 6375 [email protected]

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Note: The information and opinions in this report were prepared by ICON Corporate Finance Ltd. The data was partly provided by S&P CapIQ, plus various other sources and includes estimates, as often full financial info is not disclosed. We have endeavoured to provide accurate and timely information, but we cannot guarantee it. The brief sector overview is provided SECTOR SECTOR SECTOR SECTOR SECTOR SECTOR for general information purposes only and is based on deals HealthTech Cyber security FinTech Collaborative Doc Mgmt ITSM Consulting Unified Comms announced in the period under review. Note EV referred above is Enterprise Value which is the value of the deal adjusted for the level of debt/cash held by the target.

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