Investing to grow: the power of M&A
Two business stories caught my eye this week – and both demonstrate the ability of Mergers & Acquisitions activity to transform a business, whether you are a FTSE-100 company, or a specialist SME.
The first was the news that Newbury-based Micro Focus International is to buy the software arm of giant Hewlett Packard Enterprise, in a deal worth a reported £6.6bn. Analysts are calling this ‘a big scalp’, and they’re not overstating matters. The deal will create a new entity, one of the biggest software businesses in the UK.
It’s all the more remarkable because in 2011 Micro Focus was on the verge of being taken over, and had a market value of around £500m. Since then, under the leadership of Exec Chairman Kevin Loosemore, it has made a string of successful acquisitions, centred around its focus on the "mature software space". Put simply, this means helping old technology’ talk’ to new technology. Its share price has nearly doubled in the past year, and the company joined the FTSE 100 earlier this month.
In a relatively short time, the company’s growth has been exceptional. In 2003, Micro Focus posted revenues of $115m. For 2017, that figure is likely to be $4.5bn.
Meanwhile, over in Cambridge, there was an example of a specialist smaller company attracting huge attention. Pharmaceutical firm Excivion is currently hot property, receiving a range of interest from investors and backers hoping to fund their growth. The reason is simple: Excivion could develop the world’s very first Zika virus vaccine.
The business has a £500k government grant, but is seeking additional funds to resource vaccine development. You can bet investors see the potential: “I’ve had people contact me offering to fund the company. I’ve never heard of that in the history of my work in the biotech industry,” said Chief Exec Peter Laing in The Independent.
These are intriguing, inspiring stories of ambition and growth for 2016, from companies at very different stages in their lifecycle. Both businesses are at a milestone moment in their development, and both have identified that investment is the way forward.
Perhaps your business is approaching a crossroads too – that point where to grow, and to thrive, you need additional momentum. Who knows what the next few years could hold.