How many jewels left to sell from Cambridge’s crown?
The impending sale of ARM to SoftBank takes the most dazzling jewel in Cambridge’s technology crown into overseas ownership.
It has been quite a last 24 months for the cluster and prompts a revision of how many jewels there might be left to pluck.
Brother Industries paid £1 billion for Domino Printing Sciences. Qualcomm laid out $2.4bn for CSR and then $50 million for Nujira. Samsung had already paid $310m for CSR’s mobile business. Apple paid up to $100m for speech technology startup VocalIQ; Microsoft $250m for Cambridge IP in SwiftKey; Amazon had previously paid $26m for Evi, also speech recognition-centric; Google had already snapped up two Cambridge companies – Phonetic Arts (undisclosed sum) and DeepMind Technologies for $400m.
Last week, Cambridge online games company Jagex finally agreed to sell to Chinese investors for a reported $300m. Now ARM is set to go for $31bn – by far the biggest deal in Cambridge, UK or European tech history.
Looking at Cambridge’s other billion dollar businesses, Autonomy went to HP for more than $10bn – albeit leaving an acrimonious aftertaste; CAT was bought by AstraZeneca for $1.3bn, Solexa sold to Illumina for $600m. Virata was sold to Globespan for $1.3bn. AVEVA, Xaar and Marshall Group have stood alone.
That is comfortably more than $50bn paid for high profile Cambridge tech companies; others have slipped into foreign ownership over time, including the founding father of the Cambridge Phenomenon, Cambridge Consultants, whose parent is French company Altran.
The Amazon, Apple and Google acquisitions – while not the highest in terms of value – point to another trend which serial Cambridge entrepreneur Sherry Coutu alluded to following news of the ARM deal.
While on a macro-economic basis, Brexit and the fall in sterling’s value against the yen and the dollar will make UK firms more attractive targets financially, in micro terms there is another aspect in play – the attractiveness of Cambridge innovation and the city’s talent pool.
So it would seem sensible to look at the Cambridge startup community and the more mature pre-profit businesses as the next tranche of targets for foreign buyers. Cambridge CMOS Sensors has already gone to an Austrian buyer; I understand that Undo Software and Cambridge Communication Systems (CCSL) are on the radar of acquisitive companies in Asia and the US.
A quick stroll through Business Weekly's Killer50 and Ones2Watch lists online (http://www.businessweekly.co.uk/killer50) will reveal to investors around the world that there remain some attractive future acquisitional opportunities; Simprints; GeoSpock; Healx; Audio Analytic – and many more.
Of course that depends on their science and technology making further progress but Cambridge undoubtedly remains a honeypot around which global B2Bs are buzzing.
Only time will tell whether Cambridge is a winner or a loser in the frenzy; maybe it can only ever retain half a loaf – some might say a few crumbs – from this funding fest. Cambridge investors in our better startups, along with the founders of the businesses will make money out of the takeovers. And at least the old model of a US company, for example, hoovering up a Cambridge business, dismantling it, axing jobs and smuggling the IP across the Atlantic appears a thing of the past.
More recent acquirers have recognised the attraction of keeping roots in the cluster and feeding off the brilliance of Cambridge University research and leveraging the continuous talent pool it spawns.
The fact remains that after the initial windfall for shareholders and directors, the financial returns all funnel onto the acquiring company’s bottom line in China, Japan, America or elsewhere offshore.
Where investment is made in the acquired company’s home town environment – as SoftBank pledges will be the case as it doubles ARM’s headcount here – employees will inject cash into the Cambridge economy through housing, consumer goods, education and childcare; travel spend and so on. That is some consolation.
Cambridge’s reputational capital also gains by having names like Apple, Amazon, Microsoft and Google among its roll call.
Whether you are a glass half full or half empty kind of person, you may concede that it is better to have a glass to hold than none at all.
There then remains the ongoing challenge of getting more Cambridge science & technology companies to scale faster and grow to a decent size. I don’t see another diamond sparkling out there with the same sustainable value of ARM but I do see quite a few gems that can be polished in the right hands. Ay, there’s the rub!