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Investment prospects for tech sector hot up

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Private equity investment in the technology sector is set to increase over the next two years, led by cloud and managed services, says a report from Grant Thornton UK. More than half of the 40 UK private equity and venture capitalists it surveyed expect an upturn.

“Investors have rediscovered their appetite for technology assets, especially as fragmentation is creating a large number of specialists in niche areas, with attractive scaling options and buy-and-build opportunities for the cloud, managed services, Big Data and mobile enterprise applications sub-sectors,” said Darren Bear, corporate finance partner at Grant Thornton Cambridge.

“We’re witnessing two emerging trends in the technology sector: firstly, whilst the industry doesn't see overseas acquirers as a big trend over the next 12 months, the little we see will be from US private equity firms, as they are raising larger funds and are finding it increasingly difficult to locate good investment opportunities in the US. Secondly, we’re starting to see US-style financing in the UK and European markets and we can expect this to increase.”

Whilst deal volumes are around 60-70 per cent of the 2008 peak, the technology sector has fared better than most and 2012 has seen the return of private equity hunger for the best UK technology deals.

Over the next 12 months, two thirds of respondents to the survey expect fierce competition for deals amongst UK private equity firms. A quarter of respondents anticipate that trade buyers will be their most significant competition and 93 per cent predict that trade sales will be the most likely exit strategy. This compares to nearly a quarter predicting a sale to another financial investor and only 8 per cent believing exits will be achieved via an initial public offering.

Over half of respondents do however recognise that the financing environment and eurozone uncertainty will continue to be significant obstacles for the UK technology sector.

Grant Thornton UK has completed more than 20 mid-market transactions over the last 18 months.

Last Updated ( Thursday, 21 February 2013 13:59 )