British company Micro Focus revealed an $8.8bn (£6.6bn) takeover of the software division of US giant Hewlett Packard yesterday, with the audacious swoop hailed as an assertion of post-Brexit confidence and a landmark deal for the UK tech sector.
City analysts said the deal also signalled a “change from the post-Brexit dialogue of UK businesses being moved overseas”.
The agreement with Hewlett Packard Enterprise (HPE) is the biggest UK outbound M&A deal so far this year, according to analysis by research firm Dealogic. In terms of inbound deals Arm, the Cambridge-based chip maker, was bought by Japan’s SoftBank for around £24bn earlier this summer.
[stockChart code="MCRO" date="2016-09-08 17:00"]
The HPE deal is one of at least 10 across the world over the past week valued at £1bn or more and tallied by Dealogic in what looks like a September bounce in activity. Others included Canadian pipeline firm Enbridge, which said on Tuesday it had agreed to acquire US firm Spectra Energy for around $28bn, and Liberty Media's $4.4bn deal for Formula One.
The £6.6bn Micro Focus deal, which comes shortly after the Berkshire-based software and information technology firm replaced Arm in the FTSE 100, boosted the company's share price by 15 per cent to its highest ever level of 2,243p. The assets acquired from HPE include former UK tech firm Autonomy, which was bought out by the US company in an ill-fated 2011 deal.
Micro Focus’s acquisition was yesterday greeted as an important statement for UK firms remaining acquirers – as well as a targets – after the Brexit vote.
Stephen Kelly, a former chief executive of Micro Focus who now heads up FTSE software giant Sage, told City A.M.: “Since the Arm sale, some naysayers have delivered a vote of no confidence in Britain’s future success on the global tech stage.
“So it's great that this plucky, home-grown software company has made such a bold move so soon into its time on the FTSE 100. I think it’s brilliant proof that the UK tech industry is alive and thriving, and that there is money available for making deals with huge global tech organisations.”
“This is a landmark deal for Micro Focus, which has become one of the most rapidly expanding technology companies in the UK,” said Nick Jones, partner and head of technology at Cavendish Corporate Finance.
“It is also an important M&A transaction which reasserts the autonomy, as well as acquisitive power of UK companies, which have in recent months seen a wave of inbound acquisitions from overseas buyers.”
Vijay Michalik, of market research firm Frost & Sullivan, added: “Micro Focus’s move marks one of the largest acquisitions by UK companies in recent years and a change from the post-Brexit dialogue on UK businesses being moved overseas.”
AJ Bell investment director Russ Mould said the move showed “continued confidence in the UK technology sector following the Brexit vote”.