Here's what Skyscanner's biggest shareholder had to say about £1.4bn sale

 
Lynsey Barber
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Skyscanner investors are flying high with the sale to Ctrip (Source: Getty)

The biggest shareholder in unicorn tech startup Skyscanner, snapped up by Chinese firm Ctrip for £1.4bn, has told City A.M. the deal is a good one for the UK's tech industry, just a day after chancellor Philip Hammond announced measures to counter the trend of the UK's brightest companies selling rather than scaling up.

"This is really a positive development for the UK technology sector," said Calum Paterson, managing partner at Scottish Equity Partners, the venture capital firm which holds a third of a stake in Skyscanner.

Hammond revealed a £400m government venture capital fund in Wednesday's Autumn Statement to "tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale".

Read more: Travel website Skyscanner bought by Chinese firm Ctrip in £1.4bn deal

But, speaking about the deal, which is one of SEP's most successful exits to date, Paterson said that it was important not to be "parochial" at the same time as encouraging growth.

"It is very important to encourage the growth and success of innovative technology companies in the UK, and as venture capital investors in some of the UK's most successful technology companies we have always been of that view," he said.

"It is important not to be parochial, however, and as well as investors in the UK, Skyscanner already has investors from all over the world. Interestingly enough, as a company listed on Nasdaq, Ctrip also has shareholders from all over the world, including the UK and indeed Scotland."

The Edinburgh-based online travel firm boasts nearly $200m in venture capital investment from Sequoia Capital , Vitruvian Partners, Baillie Gifford, Artemis and Yahoo Japan among others, in addition to SEP.

The 13-year-old company employs more than 800 people in 10 offices around the world, 500 of them in the UK, and has also made acquisitions of its own, buying up small companies to aid growth over the years.

"I think the quality and attitude of the ownership is much more important than its nationality," said Peterson.

"In this case it is very clear that Ctrip will be an excellent partner for Skyscanner and the company will continue to operate independently under its existing management team, while benefiting from Ctrip's expertise and global reach."

WATCH: Skyscanner co-founder and chief executive Gareth Williams on the sale to Ctrip

Remaining independent was one of the major factors in the sale.

Skyscanner had also been considering an IPO, but the consensus among the founders, management team and major shareholders was that a sale to Ctrip was "extremely attractive and in the best interest of the company". The IPO market has been rough, with several UK companies, though not all, pulling their plans for a public listing in an uncertain market post-Brexit.

"The nature of enterprise is that ownership does change from time to time. Companies are formed privately, they may be sold to other private buyers, they may list on the stock market or they may end up becoming part of a larger business entity - as is the case here," said Paterson.

"What is very important is what happens to the underlying business and we are very confident that Skyscanner will continue to flourish as part of the Ctrip group."

The timing of the deal amid the falling value of the pound after Brexit should not be taken as a sign of foreign companies waiting to pounce either: it had no affect on the purchase consideration, said Paterson.

"We started to speak to Ctrip long before sterling plummeted," he said, also indicating a deal was in the works during a period of uncertainty when many negotiations had been put on ice.

Softbank was forced to clarify that its multibillion takeover of British tech star ARM this summer, just weeks after Brexit, was not spurred by the post-referendum sterling slump.

On the same morning the mega-deal was announced, Prime Minister Theresa May said that all foreign takeover bids of UK firms will be assessed to determine the national interest.

While Downing Street declined to comment directly on the deal, a spokesperson said: “We want to see inward investment in this country and we want to see our entrepreneurs succeed."

She added that the government wants to do "more to encourage innovation and to encourage small businesses to grow and scale up".

Read more: Red tape could stop London startups' Brexit exodus

Whether the deal would warrant the public interest test needed for such scrutiny in this case is debatable, especially with the plans for operating separately and remaining in the UK.

But, the latest efforts announced in the Autumn Statement to fuel companies scaling up indicates a more indirect rather than interventionist approach to M&A.

“This deal shows that Britain remains open for business. Tech is a global industry and we know that British companies are attractive to overseas investors because they have some of the best innovation and people in the world," said Tech City UK chief executive Gerard Grech.

"Did it have to sell? Hard to say as it’s a private company and relates to the investors and the board. However, if the chancellor wants to see fewer companies snapped up by overseas companies, there needs to be a continued shift, which the government is focused on, towards optimising the best conditions possible for entrepreneurs to build great businesses and go all the way, from late stage investment to an entrepreneurial culture."

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