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<p>Northern Tech Investment Q3 2017 October 2017 Growth investments 45 Total value of growth investments £208m Completed acquisitions 26 • In Q3, reported investment in Northern tech businesses doubled on Q2, with £208m invested. • The largest investment was a minority stake purchase of The Hut Group by Old Mutual for £125m, which valued the business at £2.5bn. This substantial investment gives the company a war chest for acquisitions in E- commerce. Since the investment, four acquisitions have been announced, two in the UK and two international. • Another notable investment was a minority stake purchase in BluJay Solutions by Temasek. The investment size was not disclosed (and not included in our total), but was reported to have valued the business at more than £500m. • Evidence of rising Northern tech investment is limited to a few headline grabbing ventures, yet Q3 has also seen the highest number of investments in a single quarter over the past 12 months. • Excluding outlier investments, Software had the strongest quarter with £30.4m invested in 17 companies, closely followed by Internet and Media businesses with £29.2m invested in 13 companies. • Overseas investment in UK tech has historically been London centric, but a number of recent investments highlight growing interest in the North from abroad, with funds flowing in from tech enterprises and financial investors across the US, Europe and Asia. A prime example is the recent £20.2m PushDoctor fundraise, which saw participation from Silicon Valley based Partech Ventures and Paris based Seventure Partners. • Locally, the Northern Powerhouse Investment Fund made six Q3 investments amounting to £4.5m in Northern tech start-ups, including three in Yorkshire, two in the North West and one in the North East. • There were 26 completed acquisitions in Q3 2017, a 79% increase on Q3 2016, suggesting continued confidence in the Northern tech sector as the impact of the Brexit vote continues to ripple through the marketplace. Sources: Beauhurst, S&P Capital IQ, KPMG proprietary research. 2 Featured investments BluJay Solutions Logistics software BluJay Solutions, a Francisco Partners portfolio company, provides supply chain solutions to large international enterprises, using cloud powered applications to overhaul all aspects of clients supply chains. It recorded FY16 revenue of £65m and EBITDA of £7m. Late in September, a minority stake was purchased by the Singapore sovereign wealth fund Temasek, which valued the business at c.£520m. In August, the company raised a $500m financing facility from TPG and BlueBay Asset Management. The debt facility allows for $200m of additional capital to finance acquisitions, which combined with the recent equity investment from Temasek, gives BluJay access to an acquisition fund of over $500m. Industry experts believe the supply chain sector is quickly heading into a period of consolidation, with large strategic acquirers seeing the value of logistics tech during the current e-commerce boom. With the financial backing of such large international players, BluJay has the capacity to be a part of this M&A drive. Optalysys High-speed computing Based in Wakefield (with additional facilities in the Nevada, USA) Optalysys is a start-up seeking to meet the ever increasing demand for faster computing capabilities. The company has developed a patented approach using light speed optical processing which would offer greater access to high-speed computing. Its solutions are ideal for data heavy modelling analysis especially in genetics and deep learning research and development. The first commercially available product is expected to launch in early 2018. In September, Optalysys raised £3.05m in equity funding from undisclosed angel investors. The capital will primarily be used to progress the technology from the final stages of prototyping to a full market ready product next year. Milky Tea Gaming and animation Milky Tea is a Liverpool based video game development and animation production studio. They have produced work for some of the world’s biggest gaming and video production brands, such as Sony, Microsoft, Valve and Nintendo. The company’s latest investor, Tencent, is a China-based tech giant and the tenth largest company in the world. It is the developer of WeChat, a messaging service with over 930m active users. More relevantly, Tencent is the owner of the hugely popular League of Legends video game, as well as a number of other gaming franchises. Milky Tea will be using the funding to expand its team in Liverpool, and invest in its own video game platform, Hyperbrawl Tournament, which it hopes to launch on Nintendo Switch and Steam in early 2018. VYPR Product development software VYPR have developed a solution which drives product development and intelligence for food retailers and manufacturers. Retailers can maximise both their new and existing product understanding through analysis of previously untapped consumer data gathered by VYPR using their proprietary technology. In Q3, the business received funding of £0.6m from existing investors Redstone Capital, and new investors 2 Sisters and KARRO Food Group. Other investors included former CEO of GBG plc, Richard Law, who has recently invested in a number of North West growing tech businesses, such as Zuto and RealityMine. Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments more than £10 million Category Company Description Investor(s)/ lender(s) Investment (£'000) Date Software BluJay Solutions BluJay Solutions develops and offers supply chain software and services to retail, manufacturing, and distribution industries in the United Kingdom and internationally. Temasek Undisclosed (known to be >£10m) 25-Sept-17 Software Cubic Motion Cubic Motion has developed software for use in collaboration with video game developers, which creates realistic video-animations of the human face. NorthEdge 20,000 04-Sep-17 Internet and Media The Hut Group The Hut Group operates a range of e- commerce websites and has also developed e-commerce software that it licenses to other online retailers. Old Mutual 125,000 13-Aug-17 Internet and Media PushDoctor Push Doctor provides an on-demand online GP surgery. Accelerated Digital Ventures, Draper Esprit, Oxford Capital, Partech Ventures, Seventure Partners 20,200 5-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 4 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments between £1 million and £10 million Category Company Description Investor(s)/ lender(s) Investment (£'000) Date IT Services and BPO hedgehog lab hedgehog lab provides technology consultancy and app development services to businesses. Maven Capital 1,000 27-Sep-17 Communications Technology and Electronics 4net 4net provides a range of communication management services to their clients, including the transferral of call centres to web-based applications, and the provision of WAN networks. YFM Equity Partners 9,000 22-Sep-17 Communications Technology and Electronics Optalysys Optalysys is developing optical processors with applications in big data and supercomputing. Instead of transistors, the optical processors make use of lasers and gel-filled cells to encode and analyse large amounts of data. Angel(s) 3,050 21-Sep-17 Software Relative Insights Relative Insights (formerly Isis Forensics) uses comparative language algorithms to help brands connect with audiences. Northern Powerhouse Investment Fund 1,150 12-Sep-17 Software Hobs Repro Hobs Repro operates a number of studios that allow customers to work with 3D printing, animation, augmented and virtual reality and CGI. BGF 4,000 11-Sep-17 Software Peak Peak creates software for analysing businesses data, collecting information from various sources and parts of the sales/business pipeline. This is used to realise efficiencies and identify areas of strength and improvement. MMC Ventures 2,500 11-Sep-17 Internet and Media Hiring Hub Hiring-Hub has developed a website on which recruitment agencies can bid for jobs offered on the site. Unknown 1,370 7-Sep-17 Communications Technology and Electronics Ionix Ionix develops piezoelectric materials (materials that generate electricity when pressure is exerted on them) that it claims can operate in high temperature, high work environments. IP Group, Parkwalk Opportunities 2,190 5-Sep-17 Other: Biotechnology BioFortuna Biofortuna has developed a range of molecular diagnostic products using proprietary freeze-dried technology. Biofortuna’s tests can be stored and transported at ambient temperature, eliminating the need for fridges, freezers and temperature controlled shipping. Foresight Ventures 1,600 15-Aug-17 Communications Technology and Electronics Origin Broadband Origin Broadband provides internet services, supplying broadband and phone packages. The company also operates their own network and datacenter in South Yorkshire. Calculus Capital 2,000 4-Aug-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 5 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments between £1 million and £10 million (cont.) Category Company Description Investor(s)/ lender(s) Investment (£'000) Date Internet and Media Milky Tea Solutions Milky Tea Studios provides digital design, production, and creation services to companies in the advertising and entertainment industries. Tencent 1,550 02-Aug-17 Internet and Media My Parcel Delivery My Parcel Delivery operates a parcel delivery price comparison and booking services website for consumers. It also operates Electio, a software platform that gives retailers access to services from global carriers. Unknown 3,140 24-Jul-17 Communications Technology and Electronics Broadband Satellite Services Broadband Satellite Services develops satellite telecommunications systems for remote areas or for use at sea. Unknown 2,480 21-Jul-17 Internet and Media Inview Inview produce digital television set-top boxes with integrated tools for program discovery and the ability for broadcasters to raise money through advertising space in the electronic program guide. Unknown 1,040 21-Jul-17 Internet and Media Offer Moments OfferMoments have developed an app which works in conjunction with interactive billboards that display products and offers tailored to the user. Unknown 1,500 14-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 6 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments less than £1 million Category Company Description Investor(s)/ lender(s) Investment (£'000) Date Internet and Media Televideo Televideo offers production services for live entertainment, commercials or corporate projects. It also provides vehicles for outside broadcasts. Northern Powerhouse Investment Fund 150 29-Sep-17 Communications Technology and Electronics CRESS CRESS is developing a storage system for energy that would otherwise be lost during industrial processes, with a focus on ports, public transportation and wind turbines. Northern Powerhouse Investment Fund 400 28-Sep-17 Internet and Media Kwizzbit Kwizzbit has developed an online quiz game. Business Enterprise Fund, Start Up Loans 40 26-Sep-17 Software Adventoris Adventoris develops software that aims to help businesses to interact with each other and with their customers. Northern Powerhouse Investment Fund 500 21-Sep-17 Communications Technology and Electronics Flixborough Eco Technologies Flixborough Eco Technologies provides a range of energy saving services such as installing solar panels, electric vehicle charging points and LED Lighting. UK Steel Enterprise 100 19-Sep-17 Software eLucid mHealth eLucid mHealth is developing medical devices and mobile software that are integrated via Bluetooth, for example, a tablet dispensing device that records when medication was taken while also link to other monitoring devices such as blood pressure monitors. GM&C Life Sciences Fund Undisclosed 18-Sep-17 Software SSLPost SSLPost has developed web-based software designed to enable organisation to securely send documents and emails to users or other organisations. Unknown 197 15-Sep-17 Software Hospify Hospify has developed a text and picture messaging app for healthcare workers. Unknown 250 31-Aug-17 Software Logincident Logincident develops mobile apps that help businesses record and manage information about health and safety risks, incidents and claims made. Unknown 40 30-Aug-17 Software VYPR VYPR has developed a web-based software that allows companies producing consumer packaged goods to tailor their product development to customer data gathered via a mobile app. Redstone Venture Managers, Angel(s), Karro Food Group, 2 Sisters 600 30-Aug-17 Software Amaven Amaven operates an online fitness tracking and educational website, designed for PE teachers, businesses and individuals to improve their sports skills and fitness levels. Greater Manchester Export Fund Undisclosed 23-Aug-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 7 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments less than £1 million (cont.) Category Company Description Investor(s)/ lender(s) Investment (£'000) Date Internet and Media JigTalk JigTalk develops a dating app where users can match each other based on a photo snippet and tagline, then must exchange messages in order to uncover jigsaw pieces and reveal each others' photos. Adapmi Ventures Undisclosed 21-Aug-17 Internet and Media Refinery Refinery operates a branding and communications agency specialising in retail and trade clients. Unknown 42 21-Aug-17 Software IQBlade IQBlade has developed web-based software designed to help subscribers evaluate their competitive market position and identify potential avenues for growth. Unknown 325 18-Aug-17 IT Services Cindr Cindr develops a subscription service called that allows users without technical knowledge to create and deploy their own websites. Unknown 492 15-Aug-17 Software E-Sign E-Sign has developed secure electronic signature software, enabling documents to be signed remotely. Unknown 14 14-Aug-17 Internet and Media GetPTfit GetPTfit develops an online platform that allows fitness professionals to easily create, automatically deliver, and sell personalised training and nutrition programs to their clients. Northern Powerhouse Investment Fund 150 8-Aug-17 Software The Sage Group plc Sage Group plc engages in the development and distribution of business management software and related products and services for small and medium sized businesses. Unknown 710 7-Aug-17 Communications Technology and Electronics Telcom Networks Telcom Networks provides internet and phone line rental for businesses, individuals and events. Unknown 420 1-Aug-17 IT Services Cake Solutions Cake Solutions provides businesses with systems development services. Unknown 13 20-Jul-17 Software Cuckuu Cuckuu develops an app that allows users to follow people of interest, and sends an alert when they post new content. Unknown 84 20-Jul-17 Software Ash.tv Ash.TV develops a mobile-device video advertisement platforms & customer targeting software powered by artificial intelligence. Northern Powershouse Investment Fund Undisclosed 18-Jul-17 Communications Technology and Electronics Metronet Metronet UK operates a physical wireless and broadband network. Unknown 20 13-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 8 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 Growth investments less than £1 million (cont.) Category Company Description Investor(s)/ lender(s) Investment (£'000) Date Internet and Media MusicVine Music Vine represents independent musicians, licenses and publishes their music, and organises contracts with marketing agencies, brands and filmmakers. Unknown 30 12-Jul-17 Communications Technology and Electronics Aerobit Aerobit develops a smart inhaler device and management platform to help patients monitor their asthma. Users' are reminded of their treatments and dosage levels and health data is collected for doctors. Unknown 202 11-Jul-17 IT Services Netopian Netopian develops online filtering and protection software for local authorities, education and business, with associated IT support services also provided. Unknown 20 10-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 9 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 M&A transactions Category Company Description Buyer(s) EV (£'000) Date IT Services Blenheim Group Blenheim Group supplies and licences software, trading as Phoenix Software. Bytes Technology Group 35,900 29-Sep-17 IT Services Viking Management Systems Viking Management Systems is the UK's largest Sage Strategic Partner. Innov8 Technology Undisclosed 29-Sep-17 Internet and Media PBF Solutions PBF Solutions has developed a digital marketing service for banks and other financial institutions that allows these institutions to diversify their deposit sources. This service includes IT consulting/web design and market research along with a digital platform that integrates with a bank's systems. Raisin Undisclosed 20-Sep-17 Communications Technology and Electronics CircleLoop CircleLoop has developed applications for computers and mobile phones owned by SME businesses which provide fixed line and mobile telecommunication services without requiring additional hardware. EKM Undisclosed 11-Sep-17 Communications Technology and Electronics Select Data Centres Select Data Centres operates a number of data centres that provide storage and facilities management services for companies within a range of sectors, including microelectronics and semiconductor manufacturing. Firstnet Solutions Undisclosed 7-Sep-17 Internet and Media ESPA ESPA is a large UK online and store retailer of beauty products. The Hut Group 100,000 6-Sep-17 IT Services Jade Solutions Jade Solutions develops enterprise mobility solutions and system integration services. The company develops solutions for Crowd Wi-Fi that facilitates digital shopping management. Econocom Group Undisclosed 4-Sep-17 Internet and Media Ravensworth Ravensworth supplies printed and online marketing resources to companies operating in the property industry. Zoopla Undisclosed 1-Sep-17 Internet and Media HeadOffice HeadOfffice provides social publishing, native marketing, and creative agency services. Epiphany Solutions Undisclosed 30-Aug-17 Internet and Media RY (Recreate Yourself) RY is one of the largest online retailers of heath and beauty products in Australia and New Zealand. The Hut Group Undisclosed 21-Aug-17 Internet and Media GlossyBox GlossyBox is a box subscription service which delivers beauty products the customers door. They operate in a number of markets such as Europe and the UK, and have recently pursued aggressive expansion in Asia. The Hut Group Undisclosed 14-Aug-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 10 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 M&A transactions (cont.) Category Company Description Buyer(s) EV (£'000) Date Software Valueworks Valueworks provides management software for organisations in the construction and social housing industries to control supply chain activities, provide analysis and manage e-commerce platforms. INPROVA Group Undisclosed 11-Aug-17 Software Medisec Software Medisec Software works with NHS organisations to help them digitise their clinical correspondence and dictation, and currently works in partnerships where it handles over 5m documents a year. Clanwilliam Group Undisclosed 9-Aug-17 Communications Technology and Electronics Calibre UK Calibre UK Limited designs and manufactures flat panel displays, display electronics, and image processing electronics for LED screens, large venue projection, digital cinema, and home theatres. Coretronic Group Undisclosed 9-Aug-17 Communications Technology and Electronics Kaiam Lasers Kaiam Lasers manufactures semiconductor wafers. II-IV Inc. 61,430 7-Aug-17 Communications Technology and Electronics Fuel Broadband Fuel Broadband is an Internet Service Provider. Post Office Undisclosed 2-Aug-17 Communications Technology and Electronics Intrinsic Intrinsic provides secure communications technology to organisations for staff to connect and collaborate digitally with each other and also with their customers. Maintel 5,250 1-Aug-17 Internet and Media Eye Airports Eye Airports provides regional airport advertising solutions in the United Kingdom. The company manages advertising and promotional spaces in airports through digital screens, brochures, sheets, bespoke sites, floor graphics, and trolleys. Ad Group Holdings Undisclosed 1-Aug-17 Communications Technology and Electronics Quickline Communications Quickline, an Internet service provider, provides broadband services to business, public sector, and residential customers through its wireless and fibre networks. Satellite Solutions Worldwide 15,500 28-Jul-17 IT Services Computeam Computeam provides IT consulting services to the education industry. The company was founded in 1998 and is based in Stockport. Integrated Data Needs Undisclosed 25-Jul-17 Internet and Media Pixel Inspirations Pixel Inspirations digital signage and out of home media agency services to organizations in the UK and Europe. Bunzl Undisclosed 20-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. 11 © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Northern Tech Investment Q2 2017 M&A transactions (cont.) Category Company Description Buyer(s) EV (£'000) Date Other: Biotechnology Tissue Regenix plc Tissue Regenix Group plc, a medical technology company, develops and commercializes platform technologies in the field of tissue engineering and regenerative medicine. Equity Offering 40,000 20-Jul-17 Software Easy Payment Gateway Easy Payment Gateway develops an online gateway for multiple payment solutions and credit card acquirers. Angel(s) 5,500 10-Jul-17 Software PROACTIS Holdings PLC PROACTIS Holdings PLC develops and sells business software, and provides installation and related support services in the United Kingdom and rest of Europe. Equity Offering 70,000 7-Jul-17 Software Nostrum Group Nostrum Group develops digital lending software for banks, finance companies, and retail brands. Equiniti Group plc Undisclosed 6-Jul-17 Internet and Media Atomhawk Design Atomhawk Design provides visual development and design services to clients in games, film, and digital media. Sumo Digital Undisclosed 4-Jul-17 Source: Beauhurst, S&P Capital IQ, KPMG proprietary research. Questions? Please contact our TMT team Graham Pearce Head of KPMG Corporate Finance Technology, Media and Telecommunications in the North Graham Pearce leads KPMG's technology, media and telecommunications sector business in the North. He specialises in advising on M&A transactions and also is supported by a multi disciplinary team of industry specialists across tax, advisory and audit within KPMG. Contact details: Phone: +44 (0) 113 231 3855 Email: graham.pearce@kpmg.co.uk kpmg.com/uk The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Designed by CREATE | CRT074287A </p>
