A combination of cash-rich corporates, increasingly bullish private equity houses and improving liquidity within capital markets will see UK tech M&A continue to outperform the broader market in 2013.
2012 was itself a positive year, with deal values reaching GBP8.3bn in the UK – and with sentiment towards the sector increasingly positive, 2013 is expected to see further momentum.
According to BDO’s report, On The Hunt For IP – Tech Businesses Go Shopping, the purchasing of intellectual property is a key trend in M&A currently, and patent acquisition is set to drive deal volumes upwards in 2013.
2012 saw a number of high-profile IP acquisitions (e.g. Facebook’s purchase of 750 patents from IBM, and Google’s USD12.5bn cash buyout of Motorola Mobility), and the UK is set to increase its attractiveness in this area in 2013 with the introduction of the 10 per cent patent box tax, which will provide an incentive to companies that maintain the UK’s position as a world leader in patented technologies.
Other areas predicted to see increased dealflow are cloud computing, where increased penetration of mobile technology and the impending 4G roll-out will drive take-up of the technology; and ‘big data’, where the unprecedented levels of data being created by even the smallest companies is driving demand for services which are capable of capturing, storing, analysing and sharing that glut of information.
The final area predicted to see significant activity is that of business-related social media, in particular mobile-driven content, which in recent times has witnessed high-profile deals such as Facebook’s purchase of Instagram for USD1bn and Google’s acquisition of social networking platform Meebo. This drive into social media is expected to continue into 2013.
Paul Russell, M&A partner, BDO, says: “2013 is set to be a positive year for UK tech M&A. All the conversations we are having with trade buyers and private equity houses point to a sector that is really on the up. Computer software transactions dominated throughout 2012, with Q2 seeing the highest number of deals in that space since the Lehman’s collapse, and we’ve also seen a real momentum in the IT managed services area.
“As liquidity gradually improves within the capital markets, and as the UK – with the 10 per cent patent box tax – makes itself ever more attractive in the realm of intellectual property, the UK tech sector looks like it is set for an exciting year.”
