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Skyscanner deal is a boost for Scottish tech

Terry smiling headIt was surely a coincidence that Philip Hammond, the new Chancellor, announced on Wednesday plans to reverse the number of promising British technology companies being bought by foreign predators.

He used his Autumn Statement to unveil £400m of funding for startups to combat the “long-standing problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale.”

Within hours,  a statement on the New York Stock Exchange confirmed the latest to British firm fall prey. Skyscanner, long regarded as the jewel in Edinburgh’s technology crown, had agreed to a £1.4 billion takeover by Shanghai-based rival, Ctrip.

As with fellow Edinburgh company FanDuel’s merger with the Boston business DraftKings, announced only days earlier, the deal brought mixed reactions.

Scotland was seeing the independence of another of its brightest prospects slip into foreign ownership.

The overwhelming reaction, however, was that this deal worked for Scotland on a number of fronts. Firstly, Skyscanner continues to be “operationally independent”. On a day-to-day basis not much changes, except its owners are a whole lot better off.

The company will also grow further, thanks to the extended reach of its resource-rich new owner which will invest heavily in the business.

As far as the Scottish technology scene is concerned, it represents a huge vote of confidence. While there may be some disappointment at losing a HQ, this deal more than any other tells the rest of the world that Scotland is in the Champions League of technology regions. It has shown it can build and support a billion dollar company. That is a badge of honour for the tech sector.

For the shareholders, they must be in dreamland. co-founder and CEO Gareth Williams gets an estimated £210m in cash and shares and his co-founders Bonamy Grimes and Barry Smith will not need to worry about the cost of living.

The biggest winner is Scottish Equity Partners whose coy managing partner Calum Paterson yesterday refused to talk numbers, except to describe the return as “exceptional”.

In fact it owns a third of the equity, giving it a £500m return on its initial £2.8m investment. That’s twice the size of its SEP V fund which closed at the beginning of this month and was the biggest fund-raising in Europe this year.

SEP now has assets under management of about £1 billion which is invested almost entirely in technology companies. Not bad for a company that began as the venture capital arm of Scottish Enterprise, run by Mr Paterson who led its breakaway into a private company.

Since then he’s expanded its operations from Blythswood Square in Glasgow to Edinburgh and London. It has spread into Europe and its latest fund indicates that more deals across the continent will follow. The latest wodge of cash finding its way into the company will come in handy.

This circle of funding is a critical argument in the build-and-sell process of developing the economy.

While there are downsides to seeing a company lose its independence, the upside is the access to greater resources which will accelerate growth, and the opportunity to re-invest the proceeds of a sale in the next generation of companies.

Mr Williams has already used his personal wealth to back a number of Scottish businesses and there is no reason to believe he will stop there.

 

 

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