Business Express is an online portal that covers the latest developments in the world of business and finance. From startups and entrepreneurship to mergers and acquisitions, Business Express provides reporting on the stories that matter most to business leaders and decision-makers.The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
image of female hand with pen over financial document SBI 305673347 1 - Business Express

Surprisingly strong start for UK tech M&A in first half of 2022, says ICON Corporate Finance. 

Headwinds of rising inflation and interest rates fail to dampen demand

Despite stronger headwinds, as inflation and interest rates rise, the impact on deals has been modest compared to 2021 – a record year for UK Tech M&A – says ICON Corporate Finance.

In its Mid-Year UK Technology M&A Snapshot 2022, ICON reports:

  • There were 501 UK tech deals announced in 1H 2022; 6% lower than last year, but 6% higher than 2019 (pre COVID)
  • Deal volumes in Q2 were actually higher than Q1 (pre-Ukraine invasion), suggesting little evidence of any slowdown
  • Valuations remain punchy at just 8% lower than last year

This comes despite the fact that shares have fallen:

  • NASDAQ and UK Tech shares are down 30% YTD
  • Loss making hyper-growth businesses have been hit particularly hard 

The blow has been softened by a combination of the significant weakness in sterling (which attracts foreign buyers) and the fact that PE raised over $1tn last year, so there is still plenty of cash around.

Brian Parker, Head of M&A at ICON, says: “We remain cautiously optimistic about Tech M&A, and that is backed up by the fact that we have a healthy deal pipeline. At ICON, it’s very much business as usual in 2022”.

Valuations in UK Tech M&A have seen falls. The median valuation IT sector M&A has dropped from 2.5x to 2.3x, a fall of 8%. Across the IT and Communications sector valuations were hugely varied, ranging from only 1x revenues for Trustmarque (a disposal by Capita), to a massive 14x revenues for Ideagen. 

Cross border deals continue to drive the sector this year, influenced by the weakness of sterling; UK-Tech companies represent good value. So far in 2022, 42% of deals have involved overseas acquirers.

Don't miss out on any breaking news or insightful opinions!
Subscribe to our free newsletter and stay updated on the go!

By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

PE/VC-backed ‘Buy and Build’ deals accounted for 50% of all deals in 2021. Although lower in 2022, at 30% there remains a lot of unspent PE cash.

The sale of Ideagen to Hg in a £1.1bn deal achieved one of the highest valuations but the sale of UK-listed EMIS for 7x revenues was also punchy. Interestingly, there were also quite a few restructuring deals including the sale of parts of Capita (Trustmarque); part of Sungard; and the sale of a division of Datatec, called Analysis Mason.

Access Group continues to be the most active buyer, acquiring six companies this year after its acquisition of eight in 2021. Having just raised £1bn to fund deals we expect a lot more of the same. 

Digitisation continues to drive revenue growth in sectors like cyber, compliance, HR, health, education, and comms. ICON also sees ongoing activity in cloud services and MSPs as businesses continue to migrate to the Cloud.

The best performing UK-listed Techs are a mix of solid performers like Calnex (which acquired iTrinegy), Netcall, iEnergizer in the booming power sector, and Nanoco. Worst performers in UK-listed Tech sector, which was down 29%, included some of the highest-valued software companies in e-commerce, transfer payments and ID management. They have been impacted by higher interest payments, as higher discount rates are applied to value future cash flows; they include: Trustpilot, Made Tech, Dot Digital and Wise.

With its dedicated office in San Francisco, and expertise in the West Coast deals climate, ICON highlights five US mega cap deals in its report:

  • Oracle’s acquisition of Cerner for $28bn in December 2021, although shares are down 20% YTD, like many companies in the sector
  • Microsoft’s $69bn acquisition of Activisation Blizzard (Call of Duty, Warcraft) – at almost 8x revenues – in January 2022
  • Broadcom’s acquisition of virtualisation specialist VMWare for $69bn or 5x revenues in May 2022
  • Vista’s acquisition of Citrix for $1.7bn or 5x revenues in January 2022
  • Elon Musk’s lapsed offer of $46bn, almost 9x revenues, for Twitter – a surprise in April. He now faces a $1bn termination fee, or worse. 

Read ICON’s UK Technology Snapshot 2022 Mid-Year here.


Recent Post: