As featured in The Scotsman Annual Deals Supplement AAB's Head of Corporate Finance, Douglas Martin, reflects on the busiest areas of the sector.
There has been a lot of activity over the last 18 months or so in the technology space. One of the busiest areas has been software as a service (saas). Businesses in this sector are often what we describe as sticky - unless something goes wrong their clients are likely to stick with them.
One thing any buyer or investor will look at is the visibility of income in a business. It's one thing to say you expect sales but the real question is around how many are in the bag. Technology businesses lend themselves very well in that respect. It's like when you're buying a mobile phone, you expect to have it for a two or three year contract. The provider can therefore pretty much bank that sale. With saas, it's very attractive as you can build the platform and continue to add additional services.
Another part of technology that appeals to investors is around the whole area of data enablers, where people interpret and monetise the information. The more you can harvest the data, particularly if you own it, and monetise it, the more attractive your business becomes, especially if there is an element of transferability. A good example of this would be in oil and gas sector where you are seeing control instrumentation for offshore being applied to renewables, and I expect more of that to happen.
Clean technologies are also doing relatively well. The pandemic has accelerated a lot of medium and long term plans in the area of clean tech.
To sum up, I believe saas will continue to grow, not least because the new normal has to be underpinned by technology. If you can go to one or a handful of companies and say I want you to manage all of my outsourced IT requirements it's generally preferable to having a number of people providing you with different services. Saas allows clients to focus on their own businesses.
Brian McMurray recently provided an overall summary of tech deal activity so far and what to look out for during the rest of 2020 - read his blog here.
Ian Marshall, Head of Tech Strategy, also provided comments on the overall importance of tech within any business as we step into the next normal. You can read his comments here.
To find out more about AAB's Technology team, click here