UK needs to unblock the IPO bottleneck
There’s good and bad news from the latest Deloitte UK technology Mergers & Acquisitions survey.
On the plus side respondents believe the market is looking up, with increased optimism and higher prices paid for tech businesses.
But on the downside confidence in going public in 2011 has crashed – with only 16 per cent seeing increased investor appetite for tech IPOs. And more worryingly given the government’s plans to use the tech sector to kick start the economy, the acquisition market is still being driven by overseas companies. 90 per cent of those surveyed believe that the US will remain the dominant buyer of UK tech businesses.
Why should this start ringing alarm bells? Not through any desire for protectionism of UK companies – tech is one of the most truly global markets and nowhere is that more obvious than in M&A. The issue is that the stall in IPOs combined with the acquisition of breakthrough UK tech businesses risks reducing the number of UK leaders we need to encourage other companies and sectors. Large, quoted companies create their own ecosystem, building up a network of suppliers, spin-outs and related businesses that mutually interconnect. For example, look at the cluster of neural network/data mining companies around Cambridge. Headed by Autonomy, companies as diverse as Linguamatics, Transversal and True Knowledge all use broadly similar technology to solve completely different sets of business problems. They benefit from access to staff and suppliers that understand the market – take out the kingpin and it gets more fragmented, and consequently companies and people drift away.
So we need a way of encouraging IPOs that attract investors for the medium to long-term – perhaps that would be a better use for government cash than propping up the banks or the Irish economy?
- Deloitte: UK Tech Firms Don’t Think 2011 Is The Year To Go Public (paidcontent.org)
- Brain drain fears as cash-rich US firms eye UK tech rivals (telegraph.co.uk)
- Tech Mergers and Acquisitions Coming Back (time.com)
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