The speed at which indigenous firms in the technology sector are gaining international scale is making them attractive targets for takeovers by large corporates.
Mark Collins, partner and head of transaction services at KMPG, says: “We’re quite fortunate in Ireland in the sense that we actively encourage tech entrepreneurship. We’ve a number of tools and funding mechanisms that support that and, as a result, we have a stable of technology assets that are very attractive, and you’ll find that some very large private equity concerns and very large multinationals have . . . acquired Irish tech businesses.”
Anya Cummins, partner in M&A advisory within Deloitte’s corporate finance group, says: “The technology sector has been particularly active this year, and this is being driven by the strength of indigenous technology companies that are experiencing strong growth in Ireland.
“As these businesses scale, they are internationalising quickly, and often international buyers and equity providers will see clear opportunities to take these platforms to international markets and to help support management teams on ambitious growth plans.
“As a result, there’s lots of activity in this space and we’re seeing strong valuations for high-performing businesses and good deal flow. We expect that technology will continue to be an important driver of M&A activity in 2017.”
Fast 50 survey
Deloitte’s most recent Fast 50 survey showed that Ireland’s top homegrown tech firms had an average revenue of €31 million each and an annual growth rate of 270 per cent over the last four years.
The report said that two-thirds of Ireland’s fastest- growing technology companies are software start-ups, while communications and hardware tech companies account for a fifth of firms featuring on the ranking.
On average, exports account for 61 per cent of turnover of these top 50 tech firms, while R&D expenditure represents just under a fifth of turnover (18 per cent).
In a sector that sees its fair share of high-profile, big-name mergers, the biggest deal in 2016 was probably US telecoms firm Verizon’s €2.1 billion takeover of Dublin-based GPS vehicle tracking company Fleetmatics.
Another merger that reinforces the trend in large multinationals buying up tech assets here was Intel’s buyout of Irish chip-design company Movidius in a deal thought to be worth about €350 million.
‘Look globally’
Michele Connolly, partner and head of corporate finance at KPMG, says: “You would have a lot more businesses being created in Ireland in the technology space that are now starting to either look globally to sell themselves or look globally in terms of expansion.
“The nature of the tech businesses means that borders are irrelevant to them, and they will look around to see how they can expand their reach by an acquisition in another jurisdiction or if there is someone with a piece of technology that is a very useful ‘bolt-on’ to their core area of activity, so that it enhances the product that they have to offer.”
The number of tech start-ups in Ireland is clearly a legacy of a strong culture of innovation here, she adds.
“There is ever-increasing demand for newer or faster or better ways of doing things, and every element of that is driven by technology. Our lives in general are becoming much more digitised, and that is driving demand for greater investment in technology. We have a huge population out there with a lot of good ideas and a lot of things to try, and that’s where the huge number of start-ups have come from.”