Although there were fewer European TMT M&A transactions announced in December, there were 21 deals valued at more than $100m including 5 in excess of $1b, according to latest data from rom corporate finance firm Regent Partners. This helped lift the aggregate value to $32b in the month. Valuation multiples remain healthy with the aggregate Price/Sales ratio up from 1.3x in November to 1.4x in December but the Price/EBITDA ratio was down from 10.0x in November to 9.3x.

None of the megadeals involved UK software and IT services companies. Indeed it was a rather quiet month on the home front, with UK deals including First Derivatives’ acquisition of Spain’s Telconomics, and buy-and-build play Castleton Technology buying again, this is time Australia’s Kinetic Information Systems.

There were also a couple  of salvage deals for UK startups, with now US-owned quick-response delivery platform Henchman buying the remnants of failed Jinn (see Henchman provides tonic for flat Jinn), and Chicago-based Victory Park Capital moving from backer to owner of UK-based ‘posh e-pawnbroker’ Borro.

Subscribers to the TechMarketView Foundation Service can read our regular quarterly summaries of corporate activity in the UK software and IT services sector in IndustryViews Corporate Activity, or just search on ‘acquisition’ in the UKHotViews archive.

For further information, please contact our Client Services team at info@techmarketview.com.

The latest year end trading update from SDL shows its journey continues to be a rough one as it confirmed the deal slippage (i.e. several deals failed to close before December 31) that led it to a profits warning in December. One positive sign is that discussions with those customers are ongoing. It was also impacted by a faster than expected shift to SaaS which caused a £1m-£2m dent in revenues across the year and had costs of £3.5m, largely related to restructuring activities.

As a result, the provider of content management and language translation software and services is expecting to report Adjusted EBITDA of £22m (after R&D capitalisation of £2.5m) on revenue up 8% yoy to £285m, with net cash of £22m, which compares poorly to H1 performance.

For a company ending year two of a three year transformation plan, where 2017 was designated the year for execution after extensive restructuring and asset divestment that included returning to its roots of language translation and technology, it is disappointing. Looking for glimmers of positivity, we can see that gross margins in the Language Services division improved in the second half of 2017 so there is something to build on. Full results are due for release on March 6 2018. 

Ex-Capgemini exec Salil Parekh officially took the helm at Bangalore-based services major, Infosys on 2nd January (see Murthy “happy” with new Infosys CEO) with the business on course to finish the FY (31st March) at prior ‘guidance’ of revenues at or around $11b.

There seemed to be no surprises in the quarter just closed (FY Q3 to 31st Dec.) with headline revenues up 8% yoy to $2.76b, 1% higher qoq, growth rates much in line with peer leader TCS (see Stately progress for TCS). Infosys’ operating margin also held steady at 24.3%, a tad up on the prior quarter and a tad down yoy.

This is about as close to ‘strong and stable’ as Parekh could hope for as he prepares to present his strategy to revitalise this offshore services 'fallen angel'.

Hyperbole worthy of Pseuds’ Corner in Private Eye abounds on the website of UK startup The Plum Guide, as it extols the artistry (I kid you not) behind its holiday home curation platform. Nonetheless, it’s a neat idea though I do wonder how a startup is able to engage what must be a huge team of ‘Home Critics’ to visit and vet “against 150 criteria” each and every property (over 1,000 so far) that is advertised on its website. The ‘shortlist’ is sourced from a scan of a couple of dozen home let websites to look for the best reviewed properties “remov(ing) anything that is in a dull neighbourhood or that has poor design aesthetics”, don’t you know.

Launched in 2016, The Plum Guide has raised £5.7m in a Series A round backed by Octopus Ventures, Local Globe, BGF Ventures and the founders of Secret Escapes, Zoopla, and Love Film. The startup had previously raised over £2m in seed funding according to CrunchBase.

I can see the attraction in a ‘Michelin Guide for holiday homes’ so long as you can rely on the recommendations. Oh, and make money too!

Outsourcing megadeals are still alive, if not kicking, witness the $2b+ multiyear contract just signed by Mumbai-based offshore services market leader TCS with US insurer Transamerica.

TCS will be migrating Transamerica’s systems to its proprietary BaNCS package, the platform supporting its UK-based policy processing subsidiary, Diligenta, marking its entrée into the US Insurance Third Party Administration marketplace. TCS will take on some 2,200 Transamerica employees who will remain located in their home cities. Transamerica is itself a subsidiary of Netherlands-headquartered insurer Aegon.

This is a landmark contract for TCS both in terms of size – its largest ever – and market potential. TechMarketView will be visiting Diligenta’s headquarters in Peterborough in the next few weeks and we’ll bring you more then.

2018 is going to be a year when a tidal wave of regulatory change hits the banking sector, with the EU’s Payment Services Directive 2 (PSD 2)/Open Banking and the EU General Data Protection Regulation (GDPR) both launching in the first half.

The first to go live was the UK’s Open Banking initiative, which came into operation this weekend, requiring the UK’s nine largest banks to open up their data and payment rails to authorised third parties. We covered the regulations in detail in our report Open Banking & PSD 2 , but the key question now is whether this is going to be a damp squib, a charter for cyber-criminals or a revolution in the way we bank?

It is important for SITS suppliers to the financial services industry to be fully briefed on the factors that are in play, so that they can anticipate the needs of their Financial Services clients and help them think through the impacts of Open Banking and how to deal with them.

Subscribers to FinancialServicesViews can access our latest FinTech report “Open Banking – It’s Alive”, here. If you don’t yet subscribe to this research stream, please contact Deb Seth on dseth@techmarketview.com

We can help you find out – and show you how to get there!

The TechMarketView Great British Scaleup programme has already helped several UK tech SMEs test their readiness to scale up further and faster using the ScaleUp Growth Index®, a proprietary scorecard which identifies areas of your business that might be an inhibitor to achieving extraordinary growth. Unlike traditional company scorecards which typically measure past financial performance, the ScaleUp Growth Index® assesses your company’s future scale-up potential.

You can find out your potential too by applying to participate in the third Great British Scaleup Event (GBS3), to be held in London on Tuesday 6th and Wednesday 7th March 2018. Successful applicants will be invited to participate in a CEO-level closed-door 90-minute workshop session with TechMarketView research directors and executive advisors from ScaleUp Group, the team of successful tech entrepreneurs that have been responsible for accelerating growth and achieving over £4b in successful exits at many well-known tech companies.

Using the ScaleUp Growth Index®, the workshop will measure your company’s scale-up potential in key areas including solution opportunity and competitiveness, business and financial model, and executive leadership to provide you with a baseline to grow from. You can then use the Index to track your progress as you implement your scale-up plans.

In addition, every applicant, whether selected for GBS3 or not, will be entitled to an optional initial infrastructure assessment at no charge and with no obligation by managed cloud and infrastructure services firm Cogeco Peer 1, the Enterprise Cloud & Infrastructure Services Technology Partner for the Great British Scaleup programme.

There are 4 workshop slots available on each of the two days of the GBS3 event. To nominate yourself or a company you know, please fill in the Nomination Form on the TechMarketView website here by Wednesday 31st January 2018. There is no charge to participate, nor any obligation to follow through on the outcomes.

Apply now and let us help you get better prepared for the next stage of your scale-up journey

If you have any queries about the Great British Scaleup programme, please drop an email to gbs@techmarketview.com or call TechMarketView Managing Partner Anthony Miller (020 3002 8463).

ATTRAQT, the online merchandising software firm, has announced that André Brown has stepped down from his role of CEO with immediate effect. Nick Habgood, the non-exec Chairman, will stand in while a new CEO is recruited.

This move follows on from a negative trading statement at the end of October, which saw revenue guidance for the full calendar year cut by 10%. Since then, trading and order intake have been in line with the updated guidance. Full year results will be announced on March 8^th which should see revenue around £13.6m, although the lower growth will depress expectations for 2018.

André Brown was one of the business’s original founders and when we met him last year was extremely enthusiastic about the company’s prospects, particularly after the bold acquisition of the significantly larger competitor Fredhopper, a year ago. Although details of the fall from grace are not forthcoming, it looks as if this deal has not worked out as well as expected – at least as far as André’s position in a much larger and more complex organisation is concerned.

The crisis at construction and outsourcing group Carillion has resulted in today’s announcement that it has entered into compulsory liquidation with immediate effect.

Carillion has issued three profit warnings in six months as it struggled with £900m of debt and a £590m pension deficit. Problems have stemmed in part from cost overruns on public-private partnerships including: the £350m Midland Metropolitan Hospital in Birmingham, the £335m Royal Liverpool University Hospital and the £745m Aberdeen bypass.

What happens to these and other key Public-sector contracts remains for now unclear but Chairman Phillip Green said this morning “We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers."

Carillion may no longer be a standalone SITS provider, having sold its IT services arm to Capita some years ago (see here), but its demise is still likely to have an impact on the wider sector.

Both ‘blue and white-collar’ Public sector outsourcing remain controversial with some, and the demise of one of its leading suppliers gives ammunition to those wishing to taint the entire sector as guilty by association. It also proves right the fundamentals, that any risk transfer to the private sector is only ultimately as safe as the strength of the provider’s balance sheet. Which begs the question as to why contracts were still being awarded to Carillion even after recent profit warnings.

The demise of Carillion is sad but perhaps predictable as it has suffered from a muddled strategy for some time. Outsourcers are ultimately judged by growth, requiring new contracts to be added on a regular basis. This in turn leads some into an increasing range of new areas taking on ever greater risks with the potential for disastrous consequences.

We were promised that the UK Government’ shared services strategy would be reinvigorated. And at the end of last week, the Cabinet Office launched its new agenda, setting a direction for the next ten years. The response on Twitter was far from positive; one digital government journalist (@ad_greenway) stated, “The most disappointing document the UK government has put out in at least 7 years”. His tweet was retweeted 59 times and liked 129 times.

The reason for the criticism? Mainly that there is a persistent commitment to the use of the large traditional ERP players: SAP and Oracle. The third platform to be developed will be a “cheaper alternative for smaller departments”. Unit 4’s Agresso platform, which was the original platform for the DfT shared services centre, but is now only used at DiFID, doesn’t get a mention in the forward view.

The ten-year roadmap is not bold enough for some. But if we are to be kinder, it would be to say that the strategy is, instead, realistic. Read more...

You should always pay attention to the fine print, and that is exactly what VC Pentech Ventures has done, leading a £2m funding round for London-based insuretech startup Digital Fineprint. New backer Force Over Mass also participated along with existing investors.

Spun out of Oxford University in 2016, Digital Fineprint, which has developed a social media analytics platform for lead generation in the insurance sector, raised seed funding a year ago (see Investors accept the Digital Fineprint).

Insuretech/insurtech is hot, hot, hot (see The problem with ‘insuretechs’ (or is that ‘insurtechs’?)! If you can think of a risk you want to insure against, there’s probably a startup out there working on it!

There are few challenges more critical to small business success (indeed survival!) than getting paid on time, and this is what London-based startup Previse aims to help with. When I wrote about Previse’s seed funding round last July I did rather get the wrong end of the stick, which the company kindly alerted me to and their comment is published in full on our website (see Fintech Previse scores £2m for buyer scorecard).

And now it’s onwards and northwards for Previse, which has just received a £800k R&D grant from Scottish Enterprise to set up a new development centre in Glasgow, creating 37 new data science jobs, and from where it plans to start rolling out its first instant-payments programme with a number of blue chip multinational buyers.

It is ironic that as a small business ourselves TechMarketView often gets paid more promptly by our SME clients than by some of the largest multinationals (no names, no pack-drill), especially when procurement and accounts payable departments reside in far-away lands. There are notable exceptions, for which we are truly grateful (Amen). But whether platforms such as Previse can alleviate what appears to be systemic payment bottlenecks in large organisations would likely depend more on corporate policy than on technology.

OSMO acquirer and supplier of corporation tax software and services, Tax Systems have updated the market on their trading. Full calendar year results are expected in April.

It looks as if things are progressing in line with their positive half-year statement, benefiting from a broader base of operations and improved prospects as the industry accelerates its progress towards automation and digitisation. The company also benefits from a high level of recurring revenue and a stable customer base. Although the company still has some £20m of debt in its balance sheet, there is the prospect of faster growth and some more inorganic additions to the group’s portfolio.

The news that Alibaba and Microsoft algorithms have both squeaked past humans on the Stanford Question Answering Dataset that tests reading comprehension is another breakthrough for machine intelligence (specifically deep neural networks). And because it relates to the difficult area of comprehension, aruguably it even goes beyond the computing power and memory fueled ‘Go’ achievement.

Although there are plenty of natural language processing AI challenges remaining and we can say the AI doesn’t comprehend in the same way a human does, the breakthrough brings the inevitable - mainstream deployment of conversational AI systems in customer facing scenarios – closer (we highlighted maintream bots in Enterprise Software Predictions 2018). Given the current level of development, we need a way to assess AI systems and the Stanford test is widely accepted but a long range question is whether we should be assessing AI on tests designed for humans, given that AI operates differently so can potentially do more things and do them differently to how a human would. Don't human-centric tests limit AI systems? (Let’s not get into the relevant but complex discussion about transparency in this HotView). 

The other significant development was that through Alibaba it was China who was the first to beat the human Stanford dataset score. There is a race to lead the machine intelligence market because of the economic, political and security spoils. 

UK-based cyber security start-up Anon AI raised £340k in pre-seed funding from a combination of sources, including the UCL Technology Fund, the London Co-Invested Fund, AI Seed and Ascencion Ventures.

Cisco is named as an advisor, and also sponsored the Elevator Pitch Award won by Anon AI in October last year.

That is a process that could offer real advantage for companies that need to keep close control over personal information they store, process and transmit to comply with new and existing data protection regulation (including the GDPR).

London-based Privatar– which closed US$16m of Series A funding back in July – takes a similar approach, and we expect to see more security tools designed to separate personal identifiers from other data to protect privacy and aid compliance emerge over the coming year.

Anon AI will use the money to improve its prototype and build a developer tool within the UCL community.

More bad news from Capita this morning that long-standing life and pensions client the Prudential will be transferring to a new supplier on 31st July 2018.

This will be particularly painful for Capita as the Prudential has been a longstanding partner for over 10 years and remains one of its largest clients, contributing revenues of around £80m a year. Capita will however continue to administer Prudential's international operations.

We are seeing the life and pensions market return to activity after a few quiet years with both new first-generation deals coming to market and existing agreements return in search of greater innovation. Whilst Capita remains by far and away the largest player in the sector, it is facing increased competition from the likes of TCS / Diligenta and Atos both of which have been winning new deals over the last year or so (see Transamerica banks on TCS’ BaNCS and Atos secures £200m BPS partnership with Aegon).

The Prudential announcement is also not related to discussions with a separate life and pensions client previously disclosed in Capita’s half year results, which may lead to the continuation of the contract with amended terms or its termination.

A trading update this morning from integrated marketing services provider Communisis, shows the company to be on track to deliver full year results in line with expectations.

The good progress shown in the first six months of the year (Communisis, managing the transition) has continued with growth seen in sales and profitability and with a further reduction in net debt to £24.3m (£30.4m in 2016).

Communisis continues to look well-positioned to provide a broader range of services under the “digital” banner and further validates CEO Andy Blundell’s strategy to focus the business on becoming a digital provider of “personalised customer communication services”.

Highlights include the resigning of one its major UK high street banking clients to a five-year digital transformation deal and the expansion of its North-East operations to meet the demand for campaign fulfilment from the UK spirits sector.

Expansion into continental Europe remains an important growth stream and trading appears to have been particularly strong in France, Spain and Poland.

Progress has also been made to reduce the deficit related to its Defined Benefit pension scheme to £38m (£55.5m in 2016).

We will report in more detail when full year results are published on 8th March.

There are plenty of apps to match you with your ideal partner, and now there’s one to help you untie the knot. London-based startup Amicable offers app-driven fixed price divorces for those couples that want to take the DIY approach. Founded in 2015 and launched in 2017, Amicable has raised just shy of £500k through angel investment club Qventures, its second round of funding.

Amicable’s website trumpets “an amicable divorce … from as little as £300”, based on its Basic Divorce Service (no financial or childcare arrangements) at £100 p.m. for 3 months, rising to £475 p.m. for 3 months for the full service (do all divorces only take 3 months?), though it is not clear whether this is per person or per couple. Court fees are additional, though the cost includes fees for its partner law firm that does the final paperwork. This contrasts, Amicable claims, with a typical £8k bill for a ‘traditional’ divorce.

Amicable also aims to address many of the important issues that may arise during the process, including “Who keeps the cat? All your pet custody questions answered”.

OK, it’s easy to take the Michael, but co-founders Pip Wilson and Kate Daly believe there is a market for quickie-style, self-service ‘amicable’ divorces and so there may be. But besides the obvious question of ‘can they make money?’, what happens, I wonder, if ‘amicable’ turns ‘nasty’?

It’s a bold move to try to disrupt the disruptors, but that’s what innovation – and spotting a gap in the market – is all about. The disruptee in this case is LinkedIn and the budding disruptor, London-based startup The Dots, which is building a social network-cum-recruitment portal for ‘creatives’ - the so-called ‘no-collar’ workers.

Founded in 2014, The Dots recently raised £4m in a funding round led by Hambro Perks. Founder and ex-TV marketing exec Pip Jamieson had raised seed funding of £1.5m in 2015 through advertising guru Sir John Hegarty, who became The Dots’ chairman.

Like LinkedIn, The Dots operates a ‘freemium’ business model, charging employers for recruitment ads, with clients including BBC, Warner Music, and Airbnb. I must say that its website is very well designed and much more ‘of the moment’ than LinkedIn’s tired look. Though not a ‘creative’ myself (some might disagree), it looks like it would attract the right community. No Collars rule, OK!

Shares in Instem hit a high of almost 30% above yesterday’s close this morning (185p) after it announced a significant new contract win and confirmed a positive trading outlook.

For a number of years, the AIM-listed provider of IT solutions to the global life sciences market has been anticipating a substantial uplift in 2018 in the volume of SEND ("Standard for the Exchange of Nonclinical Data") studies required following a mandate by the US Federal Drugs Administration (FDA). This trend should benefit Instem, which has a SEND services business and SaaS-based technology platform to support it.  Today’s contract win provides welcome evidence of the anticipated uplift – the SME believes it has signed the largest ever outsourced SEND services contract, a deal with a top five global nonclinical contract research organisation worth more than £1.7m over the initial two-year period. Indeed, CEO Phil Reason confirms that Instem is already contracted to deliver five times more SEND assignments in 2018 than it completed in 2017.

This contract win is a good start to FY18 for Instem, which, according to today’s trading update, closed FY17 (to end December) “in-line with market expectations”. After a slower than expected first half (Instem H1: New COO shakes up business) when profits suffered, the second half was reportedly much stronger. Revenue increases and expense reductions (cost savings of £0.75m were achieved in the second half) delivered an increase in full-year profit. Net cash as at 31 December was £3.1m (2016: £4.2m). We’ll know more when the full year results are announced in due course.