British Tech Firms Bought Up by Foreign Buyers After the Vote to Leave

(Bloomberg) -- In the run-up to Brexit, the home of Alan Turing and Tim Berners-Lee is looking like a tech bargain.

Overseas bidders have announced about $60 billion in deals for British tech companies since the vote to leave the European Union three years ago, according to data compiled by Bloomberg. In 2016, the number of deals surged to the highest since at least 1998 and have maintained a higher level than any of the measured years before the vote, peaking at more than 200 in 2018, the data show.

And the dealmaking is not slowing down. U.S. private equity firm Thoma Bravo’s agreement to buy Sophos Group Plc for $3.8 billion on Monday was the largest deal for a British tech company since SoftBank Group Corp. agreed to buy Cambridge-based ARM Holdings for $32 billion in 2016.

Dealmaking has been increasing steadily as big-spending buyout firms and U.S. tech companies came to shop in Cambridge and London.

The country’s tech firms tend to generate a lot of revenue outside of their home markets. As the U.K. approaches an Oct. 31 deadline to leave the EU, this acts as a hedge against the pound falling further or British sales drying up. Sophos gets less than 12% of annual revenue from the U.K., with most sales coming from the U.S. and Germany, according to its last full-year report.

Venture capital funds -- often raised in dollars -- have also found the U.K. attractive, even with the Oct. 31 deadline to leave the EU looming. In the first nine months of the year, U.K. companies reaped more than 7.4 billion pounds ($9.4 billion) compared to 7.8 billion pounds in all of 2018, according to a report this month by KPMG and Pitchbook.

However, investors are keen not to overpay with Brexit looming. For deals announced this year, British tech firms have commanded an average premium of 24% compared to 41% in the U.S., according to data compiled by Bloomberg.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Molly Schuetz

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