Private equity firms ‘plan to invest’ in UK tech companies

Over eight in 10 private equity firms holding a stake in technology companies plan to acquire at least one other IT business this year, according to a survey.

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Over eight in 10 private equity firms holding a stake in technology companies plan to acquire at least one other IT business this year, according to a survey.

Financial advisory firm Grant Thornton found 84 percent of those equity companies planned to make an acquisition in the UK by the end of the year. And seventy two percent expect the overall level of private equity investment in the country's technology sector to increase.

Grant Thornton surveyed 40 of the largest private equity firms for the report, ‘Where is the smart money going in ICT?’.

Combined with recent news that demand for IT staff increased last month, some observers may see the planned investments as an indication of confidence in the market and in technology.

Wendy Hart, corporate finance advisory partner at Grant Thornton, added that in the case of struggling tech firms, private equity houses trying to back out of their investments would find it easier than last year to sell to US buyers.

She said that the dollar exchange rate, combined with the "relative speed with which the US appears to be coming out of recession", meant there would be "continued appetite from the US for UK acquisitions”.

Nine in 10 private equity firms said they would most favour buying into cloud computing companies, as businesses took opportunities to cut costs by paying for software on demand. But opinion is split on the long term benefits of cloud in cost cutting, and analyst have at times questioned the effects.

Some 39 percent of those surveyed said they would consider green IT acquisitions, as new technology emerges and the government backs more environmental initiatives.

Nevertheless, the survey cautioned that the recession was still having an effect, and any acquisitions of IT companies were likely to be smaller in size. Its research found that 86 percent of private equity transactions last year were under £100 million, a greater proportion than two years ago when 67 percent were in that range.

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