Tech companies should think globally with their growth ambitions.
That’s the view of Graham Pearce, who leads KPMG’s technology, media and telecommunications (TMT) corporate finance business in the UK.
2021 was a record year for deal activity in the TMT sector and Pearce predicts we could be in for more of the same in 2022.
“For the technology and media world that I operate in 2021 was a record year for a number of reasons,” he says.
“What’s clear is the pandemic and Brexit were two events that shone a light on the digital and creative sector.
“Country borders and physical separation counts for less than it used to. Think globally. Customers can be all over the world, particularly for technology and software.”
Like everyone else, Pearce says he’s appalled by the current events in Ukraine and believes that support and attention must be focused completely to helping Ukrainians.
While very much secondary to the shocking events on a humanitarian level, Pearce warns that the war could also have significant consequences for global markets, and any prediction about economic activity for 2022 must be made with extreme caution, however he believes we could see even more tech activity in 2022.
“The tech revolution has been fast-tracked and the pandemic has turbo-charged it,” he explains. “The trend of root and branch tech innovation and digital transformation is here to stay.
“We are going to start going back to ‘normal’ whatever normal looks like but we’re not going to abandon the collaborative work tools that we’re now using,” he says. “We’re not going to abandon new-found habits like shopping online. The behavioural change that consumers and businesses have gone through is here to stay.
“I think the technology, media and software sector in the UK is going to expand and grow.
“The narrative from the government on the post-Brexit strategy, attempts at policies like fast track visa schemes, tax relief innovation schemes etc are all aimed at capitalising on the UK’s place as a global leader in the digital and technology sectors.”
Investment capital
According to Pearce there’s no shortage of investment money available.
“We have seen a massive uptick in the source of capital to fund technology businesses over the last 12 months from all over the world as well as from within the UK, as seeking capital returns in traditional ways has become harder with low interest rates, rising costs and other sectors being hit hard,” he says.
“There’s a record amount of dry powder out there both on the Fortune 500 balance sheets and also funds managed by the private equity and venture capitalists.
“What’s interesting is where capital might have previously invested in other sectors like bricks and mortar retail and travel and leisure, a lot has been focused into the software and technology sector. The knock on effect is that it really is fuelling valuations.”
One sector Pearce predicts technology has a crucial role to play in is the property and construction sector.
“Digital transformation has got to go through every single sector so you have to look at which sectors are furthest behind on the adoption of technology and spend on IT and property and construction is one of those,” he says.
“Property and construction is one of the biggest sectors, not just in the UK but in the world. But it’s also one of the highest polluting sectors and it’s also furthest behind in the adoption of technology and IT so anything in PropTech or construction data are really in vogue at the moment, not to mention the potential ESG impact these businesses can have.
Top tip
Pearce says one company that has really impressed him is COINS.
“COINS has been around for a long time,” he says. “It’s well respected in the construction sector. It has customers globally. It’s punching above its weight. It’s going toe-to-toe with the likes of Oracle and Microsoft and is a great British success story.
“I’d love to see the business go for more growth and achieve greater things on a global stage. It could and should be an absolute global powerhouse.”