IT firms pull in growing UK private equity investment

IT is one of the fastest growing private equity-backed sectors in the UK, according to the Sunday Times Deloitte Buyout Track 100 league table.

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IT is one of the fastest growing private equity-backed sectors in the UK, according to the Sunday Times Deloitte Buyout Track 100 league table.

The table, sponsored by Lloyds Bank Corporate Markets, Deloitte, Skillcapital and UBS Wealth Management, contains 11 IT firms in the top 100.

Of the IT companies included in the league table - which ranks mid-market private equity-backed companies with the fastest growing profits over the last two years - four feature within the top 25 firms.

Investcorp-backed Skrill, the online payments provider, reached 11th place in the league having enjoyed over 80 percent growth a year to reach profits of just under £19 million. Another high-ranking firm is IT services firm Kelway, which has seen profits surge to over £8 million on annual growth of 67 percent. Core Capital made a £5 million investment for a significant minority stake in the firm in April 2007.

Other IT firms in the league table include identification systems developer Worldmark (21st), IT services provider FDM Group (38th) and software developer i2 (80th).

Jon Herbert, head of acquisition finance at Lloyds Bank Corporate Markets, said, “The Buyout Track indicates that private equity remains a strong source of funding in the IT sector. Following a notable drop in values and volumes in early 2009, sector mergers and acquisitions activity has held up well in comparison to the wider deals market and private equity has played a key role."

He said: “There is significant potential for private equity buy and build vehicles to achieve notable growth within the IT sector, particularly in the cloud computing and converged technologies sub-sectors, which are currently undergoing widespread development and consolidation.”

Last year, financial advisory firm Grant Thornton predicted that over eight in 10 private equity firms holding a stake in technology companies planned to acquire at least one other IT business during 2010. It said 84 percent of equity companies planned to make an acquisition in the UK, and 72 percent expected the overall level of private equity investment in the country's technology sector to increase.

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