UK M&A tipped to expand as new PM plans and Thoma Bravo lands; QPE shares One Beyond revenue growth

Thoma Bravo's London office launch 'represents a significant step forward' as the firm continues to extend its investment strategy globally.

Good morning Eurohubsters, Craig McGlashan here with a jam-packed Tuesday Dealflow.

A new prime minister will be entering 10 Downing Street later today and her election – or, at least, the uncertainty it removes – might lead to a bump in UK M&A deals, according to one private equity service provider. New PM Liz Truss has talked about improving the standard of technology skills in the UK – the lack of which is partly behind some cross-border add-on deals, one private equity dealmaker told me.

Keeping the lights on. Truss had been favourite to win the race for leadership of the ruling Conservative Party for several months, but businesses would welcome the clarity her election on Monday provided, said Merlin Piscitelli, EMEA head at M&A technology provider Datasite.

“Addressing the cost-of-living and boosting the economy will continue to be top priorities,” said Piscitelli. “But now that we have a new leader, businesses can plan with better clarity. This may include investing to scale, which could signal more mergers and acquisitions in the pipeline.”

Piscitelli pointed to a survey Datasite conducted in June of 100 UK M&A professionals that found 71 percent expected volumes to rise over the next 12 months.

“Of course, increased activity will likely be dependent on how quickly effective measures to address energy concerns and the looming threat of recession are activated,” added Piscitelli. “M&A may also take longer as dealmakers assess the risks of current market uncertainty and changing valuations.”

Specifically, the Datasite research found that sell-side dealmakers spent 31 percent more time on preparation and 5 percent longer on due diligence year-on-year in the first half of 2022.

“Additionally, with a weak pound and the UK stock market trading at an ever-wider valuation discount to global peers, many UK firms will likely continue to attract investment interest from private equity firms”, which are looking deploy more than $1 trillion of dry powder, Piscitelli said.

London calling. One firm that has been spending its dry powder is Thoma Bravo. The company has been super busy in its home market of the US – you can see more on that at our affiliate site PE Hub – but is now making a big push in Europe.

We reported in mid-August that Thoma Bravo is in early discussions to buy UK cyber-defence firm Darktrace and was planning on opening a London office.

Now the new office has become a reality, as the firm on Tuesday officially announced its opening.

Irina Hemmers will head the new office and will join Thoma Bravo as a partner. Hemmers joins from Inflexion, where she led the technology investment team as partner and head of technology. Before that, Hemmers was a partner at Apax Partners.

“Europe is a critical market for the growth of Thoma Bravo, and the launch of a London office represents a significant step forward in our ability to partner with some of the best software companies in the world as we continue to extend our investment strategy globally,” said Orlando Bravo, a founder and managing partner at Thoma Bravo.

Thoma Bravo invests in software and technology companies and is headquartered in Chicago.

Aside from the potential Darktrace deal, in mid-August Thoma Bravo wrapped up the purchase of Oslo-based e-tendering and procurement system provider Mercell. In early August its portfolio firm ABC Fitness Solutions, headquartered in Sherwood, Arizona, bought Dublin-based Glofox.

Skills shortage. As mentioned at the top of today’s Dealflow, the new UK PM Liz Truss has often bemoaned a skills shortage in the UK. After she won the leadership contest on Monday, the president of the Chartered Institute for IT in the UK, Mayank Prakash, wrote her an open letter calling on the government to invest in digital skills education.

I should probably say for full disclosure that at a very small level, I contributed to the skills shortage by quitting the software programming world 15 years ago to become a journalist, but I’m not sure I was such a great loss to the industry.

In any case, the skills shortage in the UK helped in part to drive Queen’s Park Equity (QPE)-backed software development and digital transformation firm One Beyond’s latest acquisition – Budapest-based software developer JayStack in late August. It followed the £12 million ($14 million; €14 million) purchase of Spain’s GuideSmiths in March 2021.

“These acquisitions provide more talent, which in the UK is pretty scarce, but also high-quality talent, with a different set of skills that enable us to deploy not only more people, but better services for the corporates, which obviously have very dynamic needs as they embark in their projects,” QPE managing partner Jose Rodriguez told me.

“To be transparent, we have more demand for our services from our existing clients and firms within the UK than resources. This is a common theme. There’s this huge supply imbalance in this particular sector. Even though we want to help all the corporates in other parts of the world, the demand for UK services is quite large still.” This trend will last for the “next few years”, he added.

One Beyond has certainly enjoyed healthy growth since London-based QPE first invested in it in December 2020.

One Beyond’s revenues are now more than £25 million and approaching £30 million. “It was single-digit millions when we got involved,” said Rodriguez. “It has been very fast acquisitional and organic growth since we got involved. We have almost trebled our revenues in less than two years.”

Farnborough-headquartered One Beyond helps firms to digitise their businesses. It builds end-to-end software for firms or provides support teams for internal digital transformation groups.

You can read my whole interview with Jose Rodriguez here.

Best of the rest. Other news we’re looking at just now includes AnaCap-backed MRH Trowe announcing that it has completed the purchase of insurance and finance broker afm – check out PE Hub Europe for details.

And finally, Reuters quoted Giampiero Massolo, chairman of Italian infrastructure group Atlantia, as saying that a buyout of the firm by the Benetton family and US private equity firm Blackstone could be completed by the end of the year.

Phew… OK that’s it from me, I need to give my fingers a rest!

We’ll speak again on Wednesday.