HCR’s tech clients at the heart of rising M&A activity across the UK

Experian’s third quarter M&A report for the UK and Republic of Ireland concludes that the swift recovery and continued growth of the technology sector has resulted in technology becoming the main driver of deal activity in the UK. In particular, an increasing number of deals in fintech, cyber security, e-commerce and digital healthcare have been key contributors to growth across the sector.

The rapid growth and investor interest in the tech sector are very encouraging, with several key trends in a buoyant market.

Our tech clients are at the heart of this rise in M&A activity, and we have been fortunate to maintain our position for the second consecutive quarter as the most active mid-market M&A law firm in the UK. Key deals throughout the year include Circle IT, Syniti, Full Fibre and Vuealta.

Tech M&A trends

Market eager for tech scale-up potential

Private equity players are keen to bid for platform businesses which can quickly scale up through further acquisitions, driving transaction prices up in a seller-friendly market. In some cases, we have seen that tech businesses which were being primed for a traditional auction sale process have actually received pre-emptive bids for higher values.

Locked-box mechanisms lock down deals

“Locked-box” accounts are now very popular in order to price tech-related deals, rather than the more typically buyer-friendly completion accounts mechanism which allows for post-completion adjustments to the purchase price too.

Sophisticated legal due diligence, especially around open-source software

The legal due diligence processes for tech businesses, particularly around intellectual property and data, are becoming much more sophisticated. We are therefore advising seller clients to think about this well in advice of a sale process.  Clients are engaging in technical due diligence, particularly software-rich businesses, for exposures relating to open source software.  In some cases, we are helping seller clients by carrying out simulated due diligence on the tech-related aspects of businesses to help them resolve any issues pre-sale.

Early stage investment for tech businesses

Founders seeking very early stage seed and pre-seed funding are on the rise and tech businesses are shifting towards the use of US based accelerators and corporate ESG inspired funds. These funders are nimble; they can provide much needed early stage funding quickly and are often less risk-averse. They enable tech businesses to reach a greater number of later stage funders and corporate partners more quickly, giving them more reach into their intended markets at an early stage.

Cross-border transactions

We are also helping clients to complete with complex, cross-border transactions in the technology sector. Recently the firm’s corporate team, led by Tim Ward, supported Cranham Haig (trading as CHL Software) in its acquisition by Pluribus Technologies Inc from Toronto.