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24 March, 2022 - 20:55

Last year’s Technology M & A boom doesn’t stop here!

Like all M & A activity, technology deals all but stopped at the end of the first quarter (Q1) 2020 as everyone navigated the incoming global pandemic and the unprecedented uncertainty that followed., writes James Carnegie, financial due diligence partner RSM UK.

Companies pivoted quickly, however, with tech led M & A regaining traction very quickly in Q2 and throughout the second half of the year.

To position themselves for future revenue growth, many companies repositioned their M & A strategy to primarily focus on business resilience and tech solutions for the new ways of working. 

Tech businesses also looked to capitalise on this, identifying targets with high growth niche solutions or services which could be consolidated and capitalise on the needs in the marketplace.

The tech sector was one of the few industries to buck the trend of decelerated growth or revenue loss in 2020 and into 2021. 

Last year, despite the prolonged uncertainty and increased regulatory scrutiny, tech companies continued on a positive trajectory of growth, and moved to pursue more transformative deals.

The influx of tech M & A deals throughout the pandemic was largely driven by the continued ambition of private equity investors and low cost capital for corporates. As we move into the post-pandemic phase this continues to drive the market.

For most businesses, working practices have changed forever, and even those with more traditional business models, that had until recently been resistant to change, have now started embracing the need to operate in a more agile way. This has meant a need for businesses to not only configure and invest in technology at home, but within their offices or out in the field, too. 

Businesses have been required to invest heavily in tech solutions (especially cyber security) to allow their business to adapt to ‘the new normal’ and continue operating as seamlessly as conditions will allow. Consequently, the tech sector has been the big winners here and this won’t change in 2022. 
Smaller tech players directly or indirectly linked to the big tech firms like Microsoft and Amazon, have also performed well leading to big transaction multiples, and at times, at levels not seen before.

M & A activity will continue to be an increasingly important lever for growth in 2022. 

Huge volumes of liquidity that haven’t yet found a home, coupled with low interest rates mean that the outlook for the tech M & A space remains extremely positive in the medium term.

While a correction in the tech M & A market is perhaps inevitable in the longer term, it’s likely that tech will play a key part in the deals market for the foreseeable. 

The tech sector has traditionally championed the environmental, social and governance (ESG) agenda. With trust in the tech sector possibly eroding because of several factors including social trust, privacy, data use and increased regulatory attention, companies should continue to keep ESG initiatives top of mind. 

As a whole, RSM UK advised on over 240 deals last year, with a combined value of £4.1bn. This equates to a 37 per cent uplift in value when compared to 2020 and an increase of over 50 per cent when compared with pre-pandemic levels. 

Of those, RSM UK advised on over 20 tech deals in 2021, with a combined value of circa £460m across the UK – showcasing a remarkable year for the national transactions team.

RSM has advised on a range of high-profile tech deals in 2021, including the management buyout of Modern Networks, backed by Horizon Capital. Modern Networks provides outsourced tech support including infrastructure, telecommunications and support services.

The acquisition of Make Positive by Sabio (a Horizon Capital backed business) also stood out. Make Positive is a Salesforce consultancy partner, possessing a wealth of expertise across the Salesforce platform.

Further deals included advising on the acquisition of strategic insight consultancy, Incite UK and Incite US by Strat 7; advising on the sale of showroom management solution provider, enquiryMAX and leading SaaS provider FISC, to Keyloop and the investment from BGF into Celerity, a hybrid cloud and IT managed solutions provider.  

•  To contact James, email: james.carnegie [at] rsmuk.com or call either T: +44 (0)121 214 3238; or M: +44 (0)7805 874838.

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