Technology M&A in the UK set for exciting year backed by private equity and corporates

Cash rich corporates are set to bolster the performance of technology mergers & acquisitions in 2013, accountancy firm BDO predicts.

With 2012 yielding deals worth £8.3 billion in the UK technology sector, BDO’s On The Hunt For IP – Tech Businesses Go Shopping report is forecasting more of the same for the coming year.

The accountancy firm is suggesting that a combination of cash rich corporates, ‘bullish’ private equity firms and improving liquidity within capital markets will see UK technology M&A continue to outperform the wider market.

As well as increased appetite from firms and investors, BDO also says that the introduction of a 10 per cent patent box tax will serve as an incentive to technology companies operating in the UK.

BDO M&A partner Paul Russell says that 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,’ he says.

‘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.’

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The report also predicts that cloud computing will see increased deal flow due to the increased penetration of mobile technology and the continuation of the 4G network roll-out. Social media is cited as another deal driver, with blockbuster deals such as the acquisition of Instagram by Facebook for $1 billion and Google’s acquisition of Meebo serving as benchmarks.

Russell adds, ‘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.’

Back in December, the UK government outlined plans to further regenerate Old Street roundabout to support the growing tech cluster. Some £50 million is set to be freed up for the regeneration project as the coalition ramps up its commitment to Tech City.

Research released by peer-to-peer lending platform Funding Circle in September found that investments in businesses in the technology sector during the second quarter of the year pushed allocations up from £234 million in the second quarter of 2011 to £297 million over the same period in 2012.

Hunter Ruthven

Bernard Williamson

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.