UK M&A market rebounded to record levels in first half of 2021, says ICON Corporate Finance

Strong equity markets, and increased demand for transformational, disruptive tech businesses, saw valuations and deal volumes, soar in the first half of 2021, says tech-focussed investment bank ICON Corporate Finance.

As the market responded to the volatility of 2020, ICON’S UK Tech M&A Snapshot reveals that a record number of 500 transactions were completed in the period January-June, with a 'tidal wave' of money driving M&A to near record levels .

Driven by strong equity markets, valuations averaged a lofty 23x EV/EBIT, while transaction volumes were up 47 per cent year-on-year, and up 5 per cent on 2019.

Private equity and overseas acquirers meahwile, remained aggressive with the number of overseas acquisitions accounting for almost half of all deals (49 per cent).
 
Kainos has continued to expand its capability and geographic reach by acquiring Workday Partners, after previously acquiring Implexa, Formulate and Intuitive. The acquisition, from Helsinki-based Cloudator, will broaden their European footprint. Shares of Kainos have almost doubled in the past year and it trades on 9x revenues. 
 
EY has acquired UK-based Microsoft Gold Partner Pythagoras which has skillsets across Microsoft Business Applications including Dynamics 365, Power Platform and Azure. EY acquired four tech businesses in H1 in a sign that Big 4 accounting firms are looking to add sticky tech revenues to their offering.
 
Kerv, which is backed by LDC, has announced its fifth purchase in a year with its acquisition of CloudThing, a bespoke software development provider and a Microsoft Dynamics/Power Platform specialist. Kerv itself is the product of a merger of DoubleEdge, Foehn and Metaphor IT which has reached GBP35 million revenues and is a PE-backed buy-and-build roll up in the Microsoft space. 
 
nFlexion has acquired ANS, a provider of digital transformation and cloud-managed services. A key partner to Microsoft and Amazon Web Services, ANS will be merged with UKFast to combine ANS’s public cloud, DevOps, applications, and data expertise with UKFast’s leadership in private cloud, hosting and security. It will create the UK’s independent sector leader in secure cloud-led digital transformation across public and private sectors. 
 
Legal sector specialist Access Group has acquired Wolverhampton cloud IT managed services provider Oosha in a deal that adds 70 Oosha staff in a rapidly consolidating market where technology now plays a critical role in delivering digital legal services. 
 
Managed IT services provider AdEPT acquired Datrix, a supplier of advanced cloud-based networking, communications, and cybersecurity solutions. Based in London, Datrix is expert in software-defined wide area networking (SD-WAN). Its GBP1.5 million EBITDA suggests it is more a solutions provider than IP owner.
 
Private equity firm Macquarie Capital has acquired Cisco Partner Wavenet from Beech Tree. A Cisco Cloud and Managed Services Certified Partner, Wavenet has over 200 employees and provides data, voice, security, and technology services to more than 8,000 customers. It has revenues of GBP60 millio. 
 
EDM Group, a Wolverhampton-based digital records firm, has been acquired by UK-listed Restore for GBP61 million, representing a 2.3x revenue or 22x post tax profit. It is a B2B document management specialist that is an example of accelerating digitalisation as companies convert physical documents into digital collateral. Restore is now valued at almost £600m and trading at over 3x revenue.
 
CBrian Parker, Head of M&A at ICON, says: “We’ve seen deal volumes and valuations at near record levels, and with continued interest from overseas and private equity-backed acquirers, H1 2021 has made for a buoyant tech M&A market.”