Paul Herman

Why the Technology sector is so appealing to investors

A recent poll by Bluebox Corporate Finance, asked “if you were given £500k to invest in a company, what sector would it be in?”. The outcome, by an overwhelming majority, was the Technology sector. You might not be surprised to hear that many market commentators would be inclined to agree…

Despite the adverse impact the global pandemic has had on countless sectors, the Technology sector has been one that has been adversely affected (generally speaking) to a lesser degree. With many businesses adjusting their operating models to become more flexible, SaaS-based offerings like Zoom and ‘the cloud’ have become engrained into everyday life – even if “you’re on mute” is still frequently said! Consequently, there has been a significant increase in demand from both businesses and consumers for these types of solutions.

Whilst we now appear to be slowly returning to ‘normality’, it is expected that a lot of these new ways of working and living are here to stay. If anything, it is said that the global pandemic spurred on technological advancements that would have occurred at some point in the future any way.

What this means is that there is a requirement for many businesses across a variety of sectors to pivot, so not to be left behind the pack. While they may be able to do this organically, we are seeing more and more turn to M&A as a means of bolting on new capabilities. In addition, there are inevitably many technology businesses that have been unable to withstand the trials and tribulations of the last fourteen months or so, providing others with opportunistic deals.

With the shifts we have seen in both business and consumer behaviours, it is not surprising that the technology sector has been such an attractive sector for deal makers, which is evidenced by the valuations some of these businesses are trading at. Whether these valuations are true or inflated remains yet to be seen, however, it can be said that 2021 certainly looks like it will be another bumper year for M&A in Technology.

As the Technology sector sees no signs of slowing down, now is as good a time as any to explore the market. If you are thinking about either fundraising or selling your business, we would be delighted to arrange an informal meeting (over Zoom or Teams) to discuss your options in more detail. If you would like a call to discuss how Velocity can help, please call us on 0203 924 5150, or email Lauren (lauren.smithie@blueboxcfg.com) who would be more than happy to arrange a call for you.

by Paul Herman

The Email Versus Phone Call Debate

Below is a blog contribution from our sister company, Bluebox Corporate Finance. The below was written back in 2016 by James Caan who was once a part of the Bluebox Team. The blog dives into the still ever-present debate of email versus phone call.

How many people reading this would prefer to send an email than pick up a phone and have an actual conversation? My guess is over half of you.

Tech advances in contemporary culture have enabled some of the most incredible discoveries. We’ve made our businesses more productive, we’ve upskilled our workers and we’ve given ourselves more autonomy and motivation to believe in ourselves.

Yes, tech and innovation has changed the way we live, for the better. However, like most things – it has its downfalls. When I started my first job, and when I started my first business, all I had was a telephone and a copy of the yellow pages. We didn’t have access to email or instant messaging then, so in order to be successful you had to be confident enough to engage in real conversation.

The rise of email culture means that today, millennials are more comfortable communicating electronically. Email is so quick and efficient, that there’s no need to pick up the phone, right?

Whilst this may be true in some cases, I do believe email culture has stagnated the development of communications skills for our young people. I understand that picking up the phone can be nerve racking, and email is much easier but believe me when I say it can make a HUGE difference.

Here’s why:

A real conversation humanises you, and makes you more trustworthy

A real conversation allows you to gauge opinions and understand your objectives without cutting corners

A real conversation builds rapport, and people prefer working with people they like!

A real conversation means you can explain complex ideas far easier and more efficiently

A real conversation means you can illustrate your passion and excitement – something that’s difficult to portray via email

A real conversation demonstrates urgency, and means you’re more likely to get a final decision, far quicker

So next time you’re about to contact a potential employer, you’re closing a deal, speaking to a new a candidate or potential client, or looking to connect with someone… pick up the phone. Try it, and let us know how it goes.

Taking the above into consideration, we would love to have a chat with you to understand your business needs better. Call us on 0203 924 5150 and we would be more than happy to discuss how Velocity can help your business. And for those that still believe email is best, email us at info@blueboxvelocity.com.

by Paul Herman

The UK’s New National Security Screening Regime and Its Impact on M&A

Nina Searle, Corporate Partner at TLT LLP, talks about the UK’s new national security screening regime and its impact on M&A … which is much greater than you might expect.

The UK’s National Security and Investment Act 2021 (Act) was passed into law on 29 April and creates a new screening regime for transactions which might raise national security concerns in the UK.

Its intended purpose is to protect the UK’s national security from hostile foreign parties using ownership of, or influence over, UK businesses and assets.  However, it goes far beyond this and impacts domestic transactions.

The following sets out the current state of play but things may change as the regime is not expected to come into force until Autumn 2021 (although note the UK Government’s “look back” powers outlined below).

Why is the Act causing so much interest?

• It goes much further than its stated intention and catches domestic (i.e. UK only) transactions;
• It doesn’t define “national security” – but lists 17 “sensitive” sectors considered strategic enough to require a mandatory notification to the UK Government when a trigger event (see below) is proposed;
• Trigger events go far beyond a simple change of control (≥50%) of a relevant business or company; and
• It has retrospective effect so that transactions after 11 November 2020 can be called in for review.

What are the “sensitive” sectors?

The 17 sensitive sectors (as they currently stand) are set out here and capture:

• Advanced Materials
• Advanced Robotics
• Artificial Intelligence
• Civil Nuclear
• Communications
• Computing Hardware
• Critical Suppliers to Government
• Critical Suppliers to the Emergency Services
• Cryptographic Authentication
• Data Infrastructure
• Defence
• Energy
• Military and Dual-Use
• Quantum Technologies
• Satellite and Space Technologies
• Synthetic Biology
• Transport

These continue to be the subject of interrogation because of their breadth.

If the target business or assets fall within a “sensitive” sector, what do you need to do? 

1. You need to see if the proposed transaction constitutes a “trigger event”.

The wide scope of the proposed regime has generated much interest because we are not just talking about a change of control (≥50%) of the relevant business or assets. It also captures:

• minority investments;
• follow on investments;
• intragroup transactions; and
• acquisitions of an interest in land, tangible moveable property (such as physical designs and models, technical office equipment, and machinery) and “ideas, information or techniques” (such as intellectual property), and

Note too that it largely does not distinguish between solvent and insolvent transactions.

Additionally, it may extend to transactions which on the face of it involve only foreign parties/assets, where the target carries on activities or supplies goods/services to persons in the UK.

2. Establish whether the transaction is one giving rise to a mandatory notification obligation or if a voluntary notification is advised. This will depend on the nature of the trigger event.

If the target business/assets fall outside the “sensitive” sectors”, can you progress as normal?

With care - although the transaction may not trigger mandatory notification, a buyer is still encouraged to make a voluntary notification if they think it might otherwise be of interest from a national security perspective.

Additionally, The UK Government can “call in” transactions that were not notified but which raise national security concerns for up to five years after the transaction happened.

What if we need to make a notification, or voluntarily choose to do so?

The proposed buyer/investor, will need to contact the Investment Security Unit (ISU), a newly created division set up by the UK Government.  The ISU has 30 workings days to decide whether to clear the transaction or undertake an in-depth review, in which case they then have a further 45 working days to assess the transaction.

For more detail on this, please look at our published guidance here.

What happens if you go ahead without ISU approval?

If your transaction requires mandatory notification and you go ahead without ISU approval, then:

• the transaction will be legally void;
• a fine of up to 5% of worldwide turnover or £10 million (whichever is greater) can be imposed on the acquirer; and
• imprisonment of up to five years for the acquirer (or their officers, if the breach happened with their consent, connivance or neglect).

If your transaction triggers only a voluntary notification obligation, the sanctions do not apply but the ISU can “call-in” your transaction subsequently for review.  If the ISU does this and decides that a national security risk has arisen, it can impose necessary and proportionate remedies.

Next steps

There are still several moving parts to the new regime.  It is important to have it in mind for current transactions but also any which have taken place since 11 November 2020.

Do have a look at our Frequently Asked Questions for a more in-depth discussion of the regime.  We have already made submissions to the ISU and would be happy to discuss our experience.

by Paul Herman