SCOTTISH Equity Partners has doubled investment to around £100 million in the latest year amid strong interest in technology firms but noted concern about the valuations attached to some companies.
The Glasgow-based private equity firm invested £99m in the kind of high growth firms it targets in the year to June 30 compared with £50m in the preceding year.
Managing partner Calum Paterson highlighted buoyant conditions in the technology sector, as companies capitalise on growing demand for services delivered over the internet. This includes cloud-based software that is provided over the net rather than installed on computers.
SEP’s portfolio includes Skyscanner, the Edinburgh-based flight search firm which has been expanding rapidly in UK and overseas markets.
In the year to June the company added five firms to its portfolio. These include Germany-based language learning company Babbel, SSP an insurance software business with headquarters in Yorkshire and Cambridge- based cancer testing company Abcodia.
SEP provided further funding for the Glasgow-based Smarter Grid Solutions energy management business.
The firm said companies in its portfolio achieved strong operating performances. Total employee numbers grew by ten per cent, from 4,600 to over 5,000.The aggregate revenues of portfolio companies increased by 20 per cent from £700m to £850m.
SEP sold its stakes in some firms including Scotland’s Green Highland Renewables. The small-scale hydro scheme developer was acquired by the Ancala Partners infrastructure investor in a deal thought to be worth millions of pounds.
Mr Paterson said: “We have had a very busy 12 months, and in general terms our portfolio companies have performed very well indeed. The technology sector is especially buoyant right now.”
SEP is continuing to see particularly strong deal flow for software and cloud-enabled service companies, and businesses in the consumer internet sector.
However, Mr Paterson noted the technology sector had been buoyant before only to fall into a downturn. This resulted in a slump in the valuations of some firms.
He said: “While there are undoubtedly some very attractive opportunities, many of the companies we see may ultimately struggle to justify their lofty valuations. Exit conditions are good right now, however, and this is arguably a better time to be selling than to buying.”
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