International law firm Pinsent Masons today launched its What’s Market? Technology Report covering Q1 2012. The report uncovered a growth in tech start up transactions, a focus on biosciences activity, greater international influence on deals, a wider spread of transaction types and increased deal completion in January and February 2012.
The Pinsent Masons report highlights five key trends:
1 Greater spread of transactions across the quarter
In Q1 2011, 80% of transactions completed in March, before the end of the tax year with very low activity in January and February. In contrast in 2012 all tech deals that Pinsent Masons supported completed in January and February, with none in March at all. This shows a more constant deal flow throughout the quarter, rather than transactions being driven by company and tax year ends.
2 Greater spread of transaction types
Q1 deals have been split relatively equally across multiple types of transaction, with M&A and share planning each representing 25% of contracts. Start up/early stage investment, joint venture, group reorganisation and taking a company private each comprised 12.5% of total transactions. While the sample size is relatively small this does demonstrate an increasing variety of corporate transaction types within the sector during Q1 2012.
3 Growth in tech start up and early stage investment
Tech start up transactions are on the increase and look set to continue to grow into Q2 2012. Of the 10 new instructions (covering pure start up advice, Series A and other early stage investments) received by Pinsent Masons in Q1, eight of these came in March alone. A key driver here is the introduction of Seed Enterprise Investment Scheme (SEIS) relief, which applies from 6 April 2012. SEIS allows investors to receive 50% tax relief on investments made in UK start ups with less than 25 workers and assets of less than £200,000.
In Q1 2012 the most active technology sector for Pinsent Masons has been biosciences (37.5% of transactions), which reflects recent increased wider market activity (such as AstraZeneca’s acquisition of Ardea Biosciences) and the UK’s global leadership position in the area. Other transactions took place in IT/Software (25%), and SaaS, IT Consulting and Online Retail (12.5% for each).
5 International perspective
Pinsent Masons’ analysis shows that there is a growing international dimension to mid-market technology M&A transactions – either from UK/US companies buying internationally or overseas investment in the UK market. The first trend is being driven by the decreasing talent pool in the UK/US as larger tech players have increased their hiring of key staff. This forces many mid-market companies to look at investing in businesses in markets such as Eastern Europe and the BRIC companies in order to secure the skills they need to grow. The second trend, greater international investment in the UK, has been motivated by Government plans to position the country as a leader in technology innovation, particularly through initiatives such as Tech City in London.
Pinsent Masons' partner Andrew Hornigold commented:
"Based on our Q1 analysis, 2012 promises to see a consistently high level of corporate activity in the tech sector, helped by UK government initiatives such as Tech City and Seed Enterprise Investment Scheme (SEIS) relief. While the market is still cautious, we’re seeing an increased focus on both biosciences and start up transactions - if this continues it will help more innovative businesses to grow, stimulating the whole technology sector and ultimately positively impacting the overall UK economy. During 2012 we’ll monitor and analyse these emerging trends to see how they develop and what they mean for technology companies of all sizes.”
The Q1 2012 report is an update to the successful What’s Market? Technology Report 2011, providing a snapshot of deal activity in the sector. In Q1 2012 Pinsent Masons advised on technology transactions with a combined value of more than £30 million, building on the £340+m of deals it advised on in 2011. Comparing this data, and combining it with its market experience, it has been able to provide a comprehensive analysis of the factors currently driving technology deals.
To download and read the report please visit http://www.pinsentmasons.com/PDF/Whats_Market_Report_2012_Q1.pdf