- IP services M&A activity over the last five years valued at $5.4 billion
- Deals have seen annual compound growth of 35%; further M&A activity forecast
- Large proportion of purchases driven by private equity investment
In the last year there has been a noticeable increase in mergers and acquisitions (M&A) deals involving IP service providers. New research from advisory firm Quayle Munro has valued this activity at $5.4 billion over the past five years, and forecasts that more growth and consolidation is to come.
The research, contained in a white paper, reveals that the number of M&A deals involving IP software, data and analytics has increased by more than a third since 2015, with private equity increasingly eyeing the sector (of the 17 deals closed in the last year, 12 involved private equity investment). In total, deals over the last five years are calculated to have totalled $5.4 billion in value, with compound growth of almost 35% annually. However, as only a quarter of transactions make their values public, that the total value of these deals is likely to be considerably higher.
The growing interest in IP service providers has been attributed to the shift to a knowledge economy and increased dependence on intellectual property. Andrew Adams, CEO at Quayle Munro, avers: “In today’s economy, companies’ values are increasingly tied to their intellectual property and those at the board level recognise that. Consequently, we’re seeing major interest in decision-making and workflow solutions that can help safeguard and enhance IP in order to create value from it. These tools are not just being used by big businesses to manage their IP portfolios. With delivery models such as software as a service, SMEs are also able to access them, providing massive opportunities for the market to grow. With these dynamics in mind, we anticipate that the M&A market in this sector will go from strength to strength.”
To emphasise this point, the white paper highlights the fact that there have already been four new deals announced in the first quarter of 2017 alone. The paper also predicts that the IP services market will continue to consolidate as big players drive further M&A activity.
Over the last year, there have been many large and noteworthy buy-outs, mainly by private equity firms: from Thomson Reuters’ record $3.5 billion sale of its IP & science unit in 2016 to the more recent purchase of CPA Global for $3.1 billion by Leonard Green & Partners. Whether these enormous deals will be topped in the near future remains to be seen, but what is apparent is that this trend of consolidation won’t be reversing any time soon.
The research demonstrates the growing influence and value of IP technology, but the consolidation of these services could be a mixed blessing for brand owners. Rights holders may benefit from a wider range of services in the event of a merger or acquisition; however, as these deals become more commonplace, so too does the danger of prices being driven up, especially as competition in the market is reduced. In any case, it is worth bearing in mind that we will likely be seeing plenty more M&A deals in this sector in the near future.