2020 has presented monumental challenges to global economies resulting in many people expecting a slowdown in deal volume. Despite these unprecedented times, deal activity in the tech sector has remained buoyant as both private equity and strategic acquirers continue to seek acquisition and investment opportunities to support their growth aspirations.
Although Technology deal volume did naturally dip in the first quarter of 2020 compared to the same period in 2019, this was only by 15 per cent against a backdrop which saw falls of 35 per cent in the overall global mergers and acquisitions (M&A) volume and illustrates the industry’s resilience in the face of the worldwide pandemic.
There have recently been several high profile transactions in the technology sector of late, such as VISA’s $5.3 billion acquisition of Plaid – a network which securely connects financial accounts to apps and their rivals, Mastercard’s acquisition of Finicity for $825m – fintech specialising in open banking.
Ebay also made the decision to sell its online classified ads business to Norway-based digital marketplace owner Adevinta, valuing the business unit at $9.2 billion. Another acquisition was announced by Amazon with an agreement in place to buy Zoox – a self-driving start-up founded in 2014 for a reported $1.2 billion and Facebook also announced a $5.7 billion investment in India-based internet service provider in Jio.
Within the second quarter of 2020 alone, the UK recorded 84 deals with an increase of 1153 per cent in deal value compared to quarter one of 2020 through sizeable transactions such as O2 and Virgin Media’s $18.82 billion merger and Keysight Technologies’ $330m acquisition of TestPlant Europe.
Further examples which illustrate activity in the UK mid-market include Accenture’s £107 million acquisition of computer security services provider, Context Information Security, Canadian listed Constellation Software’s acquisition of Motion Software via its UK subsidiary Jonas Software (undisclosed) and cloud computing company Beeks Financial Cloud’s acquisition of Velocimetrics for £1.3 million.
Some earlier stage Scottish-based tech companies have also succeeded in attracting growth capital at a time where many investors are being extremely cautious and looking after their existing portfolio companies. Examples include the recent £1.6 million investment in EC-OG led by Par Equity and AdInMo raising £500,000 of seed investment led by Techstart Ventures. Both investments completed during lockdown.
More recently, Trojan Energy, secured seed funding of £4.1 million, led by Equity Gap and included SIS Ventures, Alba Equity and Scottish Investment Bank (SIB) and Reactec, were successful in raising £700,000 in a funding round led by Archangles and SIB.
The trend of M&A activity in the tech sector is certainly positive and one which we do not expect to contract any time soon. From regular dialogue with other advisors, acquirers and investors, there is a real sense that businesses operating in key tech sub sectors, such as cloud computing, fintech and IT support services and in particular those businesses with a Software as a Service (SaaS) business model will be of heightened interest and focus from an M&A perspective in the upcoming months.
2020 will be a year where technology is at the heart of every business and making it an opportunity for those companies providing tech solutions to accelerate their growth.