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    Sector Insight: Information Technology

    The UK IT sector has grown significantly over the years, and we are seeing no indication of this expansion slowing down. The industry is currently estimated to be worth around £35bn, and according to Tech Nation, it is growing at twice the rate of the wider UK economy.

    As a successful, innovative and continuously evolving industry, it comes as no surprise that the UK IT sector has attracted buyers from all over the globe in recent years, and as a result, the sector is thriving within the wider M&A market. Tech Nation reports that the UK market is leading the way in terms of IT M&A in Europe, having gained over £28bn of investment and acquisition values since 2011.

    According to Zephyr, the company deals database, the last three years have been particularly exciting for the sector, with the UK playing host to circa 1,200 IT deals. Deal volumes have remained consistently high throughout this time, with 397 deals completed in 2014, 378 in 2015 and 463 in 2016. It appears as though 2017 will continue to deliver great successes for the IT industry, with circa 140 deals completed in the first five months of the year alone.

    UK trade buyers from within the IT sector have displayed a significant interest in domestic acquisitions in recent years. Zephyr reports that during the last three years, circa 700 deals have taken place involving both UK companies from within the IT sector and UK trade buyers. One of the most high profile and memorable deals completed during this time was the acquisition of Pace plc, a British provider of software services for the pay-TV and broadband services industry. The company was acquired by ARRIS International Limited, a British telecommunications equipment manufacturer, for a final value of £1.34 billion.

    Although trade acquirers have played a large role in the IT sector’s high deal volumes, the activity witnessed from private equity and venture capital investors has been outstanding. Within the last three years alone, there have been over 1,000 private equity investments in UK companies within the IT sector, according to Zephyr. Interest in the sector has largely stemmed from a global emphasis on the importance of cloud-based software and technology, and the investor’s repeated desire to establish corporate synergies that will aid a ‘buy and build’ strategy.

    The future is bright for the IT M&A market; Zephyr notes that 24 deals involving UK targets have been announced or are rumoured to be in the pipeline in the coming months. One of the most notable rumoured deals involves XBridge Limited, otherwise known as Simply Business, the UK’s largest online business insurance broker. The Travelers Companies Inc., the American insurance firm, is rumoured to be acquiring the business for a sale value of circa £402m.

    These rumoured and announced deals, coupled with the sector’s projected growth and the clear buyer interest in IT companies have led KBS Corporate to predict that the IT sector will continue to shine within the wider M&A market in the years to come.

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