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‘With technology moving at such a fast pace, missing a new development greatly hinders a business’s ability to catch up’


Table 1: Quarterly tech deals – volume Deal quarterly value


(announced date) 2011 annualised Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008


No. of deals


552 96


115 128 119 112 123 112 85 82 74 69 70


Source: Zephyr and Bureau van Dijk


can be attributed to the research and development that was reined in following uncertainty in the markets, with many top tech companies now flush with cash and looking to acquire again.


MISSED TRICK


With technology moving at such a fast pace, Pearson says that missing a new development greatly hinders a business’s ability to catch up. ‘These waves of change mean that people have to react. If they don’t have the product they just go and buy it,’ he adds.


Business software company K3 is using technology acquisitions to achieve a rapid rate of growth that has seen the Manchester-based business post revenues of £44 million, a 20 per cent rise on 2009. Chief executive officer Andy Makeham comments, ‘We’ve just done a small placing that has been matched pound for pound by the bank, so that gives us another acquisition war chest to go out and press on with.’


The AIM-listed software business has had a busy 2011, with the recent


52 Mergers & Acquisitions


Table 2: Quarterly tech deals – value Deal quarterly value (announced date) 2011 annualised Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008


Aggregate known value (£m) 4,152 474


2,699 821


1,223 541 488 489 587 374


1,152 751 883


Source: Zephyr and Bureau van Dijk


acquisition of e-commerce company FD Systems following on from three other deals for Azzuri Retail, Clarita Solutions and Sense Enterprise Solutions. Makeham comments, ‘I think prices are more affordable right now. We are finding that there is plenty to buy at sensible prices. Owners are generally thinking there is a tough ten-year period ahead and that now is probably the right time to get out.’ For the technology sector, Makeham explains that people need to buy in order to grow. If they can find an area that they want to expand into, it is far quicker to buy the growth than find it organically, he adds.


Looking at what is driving deals for K3, Makeham explains that, while the rationale behind its acquisition criteria in previous years was about bolstering K3’s infrastructure, it is now about expanding its customer base.


‘Up until 2009 we were building our infrastructure so, to an extent, the acquisitions were harder as we were buying management,’ he adds. As K3 has achieved what Makeham


describes as the ‘magical £50 million market cap’, during the past six months the business has been offered an acquisition on an almost daily basis, a position that he believes should lead to attractive future buys.


CROSS-BORDER SURGE Figures for the technology sector also show that cross-border M&A, involving a UK acquirer, has seen a rapid increase in both deal values and volume. The number of deals in 2011 is on course to reach 62, with total known values increasing from £648 million to £1.42 billion, if trends continue (see Table 3).


One such company riding on the wave of cross-border activity is Kent- headquartered Synchronica, an AIM- listed mobile messaging and social networking company.


Carsten Brinkshulte, CEO of Synchronica, says that the £15.5 million deal he has struck to buy Finland-based mobile phone giant Nokia’s Operator Branded Messaging business in a reverse takeover will not only pay for itself in the short term, but also transform the company’s business model and profit prospects.


He comments, ‘Across the market we are seeing the move from sending messages via SMS to using email and social media sites such as Facebook.’


Brinkshulte explains that with any purchase made by Synchronica, two criteria must always be met: the technology aspect and an expansion of market share. He adds, ‘It is clear that building a product in any sector, particularly technology, is very complex. ‘It requires time, money and effort to build and roll out an application, so it’s more valuable to buy something that has already gone though that process than get


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