Dealmakers: On cloud nine
Nelson-based telecoms group Daisy has demerged its cloud business into a separate company with a £1bn valuation and an eye to flotation on the London Stock Exchange.
The IPO route Digital Wholesale Solutions (DWS) is looking to take is set to become one taken by a growing number of North West tech businesses, according to market watchers.
And there are predictions that competition for investment is set to intensify as UK IPO activity is expected to surge this year.
Daisy group founder Matthew Riley agreed the sale of a stake in DWS to private equity fund Inflexion in January.
The business says the move has secured 200-plus jobs at the company’s Lancashire HQ as well as opening the door to future growth and development.
DWS was founded in 2007 and was separated out under the leadership of chief executive Terry O’Brien in May 2019.
He will remain in post, leading the business with the support of his existing management team, with Matthew Riley continuing as chairman.
Matthew Riley said: “We made the strategic decision to separate DWS from the Daisy Group over two and half years ago in order to allow the relevant divisions to concentrate on growth.
Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market
“This, coupled with the simplifying of how we go to market, has enabled DWS to gain market leading organic growth.
“The opportunity for the channel to take more share of the UK market over the next five years is unprecedented.
“It was very important that jobs were secured within the deal and am proud to say that this is the case, with a lot of scope for further development and recruitment down the line. It really is fantastic news for the Lancashire area.”
In a statement Inflexion said: “DWS is a great fit for Inflexion’s portfolio. There are many things that we like about the business; it is a strong, growing, entrepreneur-led business, operating in a resilient sector, delivering recurring revenues on a proprietary software platform, with an excellent management team and an excellent reputation and high customer satisfaction.
“This is a perfect recipe for the public markets; Inflexion has long experience in backing entrepreneurs with pre-IPO fund raising and we are looking forward to working with Terry and his team to de-leverage DWS and advise and guide as it prepares for a successful IPO.”
A new report by EY has revealed how the London Stock Exchange closed last year with a flourish of activity, which is predicted to continue in 2021.
That IPO activity is set to be spearheaded by tech companies. Mark Clephan, partner for EY’s North corporate finance team, said: “It’s promising to see 25 per cent of total funds raised in 2020 attributed to technology IPOs.
“These are likely to become increasingly prominent with FinTech, Tech and BioTech sectors expected to be key growth sectors for the IPO market in the future.”
He added: “I expect that we will see new IPOs from North West tech businesses over the next two years.
“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market.
“An uptick in IPO activity may well intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors.
“Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the roll out of Covid-19 vaccinations.”
And it may not just be tech companies looking at future flotation. There has been renewed speculation that Blackburn-headquartered EG Group is considering an initial IPO that could value the global convenience retailer at more than £10bn.
The business operates convenience stores, foodservice outlets and fuel stations at more than 6,000 sites in 10 countries including the UK and Ireland, the US, Australia, Germany, Italy, France and Benelux. Group sales exceeded £17bn in 2019.
According to reports late last year early conversations with banks had taken place with a possible listing in the US.
EG Group, created and grown by brothers Mohsin and Zuber Issa and jointly owned by them and TDR Capital, made no comment, though sources say it has been no secret that an IPO might be considered at some point.
And expectations of such a listing were raised again by the January appointment of Stuart Rose as non-executive chairman.
The retail veteran has held influential senior roles at Argos, Arcadia, Marks and Spencer and Ocado, often serving during times of mergers and acquisitions.
Lord Rose, who steps down as Ocado chairman in May, said: “The business has exciting development plans and exceptional prospects in the years to come.”
TDR Capital partner Gary Lindsay said Lord Rose’s recruitment was “a clear signal of our ambition for EG Group”.
Separate from their EG business, the Issa brothers and TDR agreed last October to buy a majority stake in Asda from Walmart in a deal valuing the supermarket group at £6.8bn.
Following the completion of the acquisition EG Group will acquire Asda’s forecourts operation in a £750m deal set to be completed in the second quarter of 2021.
Tremayne Ducker, head of corporate finance at Zeus Capital, believes there is a “strong appetite” for IPOs in the North West, from both company shareholders and investors.
He says: “We’ve been approached by a number of businesses in the region that are actively considering a move to public markets, ranging from private and family-owned businesses to companies that have already received private equity or venture capital funding.
“This appetite is being driven by a general positivity around public markets and news flow, with several high-profile businesses announcing their intention to float and institutional investors being encouraged by liquidity in the markets.
“We predict that the momentum towards IPOs in the North West will continue to grow in parallel with the national appetite.”
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