Will ARM buyout lead to more foreign investment in the UK?

Cambridge-based chip manufacturer ARM is set to be acquired by Japan’s SoftBank for £24.3 billion ($32 billion).

Suffice to say, the deal cost SoftBank an ARM and a leg.

ARM might not have been a household name before this mega deal but, according to Entatech chairman David Atherton “it deserves a place in history alongside Microsoft and Apple”, and that the company is “almost single-handedly responsible for the practicality of the modern mobile phone, after the ‘bricks’ of the 1980s.” 

The group is currently responsible for the chips in 95 per cent of smartphones.

Similarly, Westcoast MD Alex Tatham referred to ARM as “one of Britain’s great technology companies”, adding, “I’m sad to see it out of British hands”.

GFK’s Carl West said that ARM has been “a jewel in our crown for many years”.

This bleary-eyed nostalgia however might be overstated, claimed Jonathan Wagstaff, UK country manager at Context: “I’ve heard lamentations that the UK has lost its last independent tech giant with truly global operations, and that this is an ironic result for a vote on greater international autonomy.”

To illustrate what the deal is worth, for £24 billion you could buy LinkedIn ($26.2 billion), Oculus ($2 billion), Nest ($3.2 billion) and still have some pocket change. 

It is no coincidence that the mammoth offering from SoftBank comes in the wake of the UK’s decision to leave the EU. 

The deal itself cost the Japanese telecommunications corporation 12 per cent less than it would have a few weeks before. Wagstaff said: “This was the inevitable consequence of plummeting exchange rates and I’m sure we will see more of this happening in the near future.”

In a similar vein, David Atherton goes as far as to identify two companies that might be attracting foreign buyers in the near future: ”Hertfordshire-based PowerVR chip designer Imagination Technologies, which dealers will fondly remember as the graphics card brand VideoLogic. Its share price is already up 16 per cent since the ARM news, despite making a huge loss last year.” 

He also stated that inkjet technology specialist Xaar could present “another possible Brexit bargain for international investors”.

Others in the industry are more sceptical, and are unsure about whether this deal is the proverbial domino that sparks a flurry of foreign investment and aqcusitions in UK companies. 

West added: “With a vibrant tech startup community and still much IP owned by UK companies, there will be more news to come, but I do not feel it will be anywhere near a stampede.”

Alex Tatham is quite adamant that this won’t be the start of a ‘Brexodus’ of UK tech. He stated: “Do I think there will be an increased level of foreign purchases of UK tech companies? No, I don’t think so.

“I think that people will buy good companies wherever they are and if that’s part of their strategy, then they will look to buy where there’s value and where there is opportunity to create value.”

Looking forward then, it’s unclear what sort of precedent this sets for foreign acquisitions of technology companies in the UK. 

Jonathan Wagstaff stated: “The new minister of state for digital and culture, Matt Hancock, is welcoming the deal with open arms, although the Government has already delayed a report on digital strategy by six months.

“It’s anyone’s guess as to what their position will be if these acquisitions continue.”

It remains to be seen just how this deal will shape the future of the UK tech industry, but there is one thing the technology channel can uniformly agree over, according to Wagstaff: “To foreign investors, UK tech is considered desirable and world-class, even if it is becoming an unlikely bargain.”

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