UK stiff upper lip helps sector stay strong

The UK tech sector remains pretty buoyant when it comes to acquisition activity – making up a third of all worldwide transactions in 2008.

So says a report published today by PricewaterhouseCoopers (PwC), which also highlights that the tech sector worldwide is faring much better than other areas of industry.

The value of deals during the last year rose by 10 per cent to bring in €17.7 billion (£16 billion), although the actual volume of transactions fell, according to the research.

“[The news] is positive in the sense that it’s more positive than most other industries at the moment. But there has been a decline in overall transaction activity levels, which are down about 30 per cent globally and about 13 per cent in the UK,” said Andy Morgan, Technology sector leader in PwC’s corporate finance division.

“The UK market has held up better than the global M&A market in the sector. Most of the activity has been what we call ‘mid-market’ activity. That is, the UK ecosystem of tech companies is essentially mid-market [so] hasn’t been as dependent on mega deals. Also, towards the back end of the year [the market may have benefited from a] little bit support through the weakening of sterling, which makes the UK look more attractively-priced than may have been the case in the first half of the year.”

But, the UK tech sector shouldn’t use its comparative insulation to the bleak economic outlook as an excuse to rest on its laurels.

“We’re certainly in for a tough six to nine months. What we’ll see is the types of deals being done will change. We’ll also see some reshaping of portfolios in the sector [as companies work out] what’s core and not core,” added Morgan.

“When people look back, 2009 will probably be a pretty good vintage for returns on transactions for the sector. But it’s difficult to make a call on to what extent. The big challenge at the moment is the lack of visibility.”

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