Overpaid, over sexed and over here?
While it may appear that American high flyers are winging in at G-force to take out Cambridge’s tech top guns there is an element of optical illusion in the high-speed manouevres we’ve been witnessing.
When American airmen and GIs were based in the UK during the War it was rather unkindly suggested that they were ‘Overpaid, oversexed and over here.’
Their 21st Century counterparts have been shelling out substantially more than a few pairs of nylons and bars of chocolate to seduce the locals. Billions have changed hands in the acquisitions of Cambridge companies in recent times.
But deeper analysis shows that – not for the first time, to sustain a wartime joke – the Americans were late arrivals when the battle lines were drawn for international deals in Cambridge.
As in the recent soccer transfer window, many of the fees involved in some of the most significant Cambridge deals have had an ‘undisclosed’ sticker slapped across them. It is therefore not recorded how much Dutch doyen Philips paid for the first famous Cambridge technology business to change hands into foreign ownership – Pye Ltd.
Founded in 1896 by William Pye – an employee at the Cavendish Laboratory – Pye started part-time making scientific instruments. Its product portfolio expanded to answer the call of the nation in wartime and consumers in between.
Its wireless technology saved our troops from annihilation in the trenches. Ten years after the Second World War ended, Pye entered the music recording business. Then it expanded into television manufacture.
Competition from cheap foreign imports put Pye in deep financial trouble and Philips tried to buy the business in 1966, only to be thwarted under monopoly red tape by Trade Secretary Tony Benn. Exactly 10 years later the Dutch acquirer called again and this time was allowed to take over the entire group exactly 80 years after its foundation.
The European theme also runs through the story of how Cambridge Consultants – the founder of the Cambridge technology cluster in 1960 – managed to survive to the present day. The company owes a debt to the French for bailing out stricken Americans.
Arthur D.Little rescued the business from its first financial crisis but when the US consultancy itself went bust it was French company Altran that won out at auction and backed a Cambridge-led management buyout. It remains a cornerstone partner today.
It was the Spanish that first waded into the Cambridge utilities market with the £54.2m acquisition of Cambridge Water in 1999, Union Fenosa arriving on the scene with a surprise ole – or should that be eau-le? Fenosa then sold the business to CKI in Hong Kong for £54.1m and the business has now changed hands again with HSBC paying £74.1m: A combined haul of £182.3m with a rising value over 12 years.
Deals have subsequently been written not just in an American drawl but with accents varying from French to Flemish and from Indian to Japanese – even a touch of Aussie strine.
Many might have expected Alex van Someren’s nCipher to slip across the Pond but it was French defence electronics firm Thales who bought it in July 2008 for around £50.7m.
Indian pharma giant Dr Reddy’s took Chirotech in the same year (fee undisclosed) and has since trebled the size of the Cambridge R & D hub. When the Japanese make their move they tend to invest big and stay in for the long haul, as Takeda and Sosei have done after a string of impressive investments.
Sosei paid £106.5m for Arakis in July 2005 as 3i exited. The yen for Cambridge biotech excellence continued as Takeda acquired Paradigm Therapeutics in 2007 – the price undisclosed.
It was the Belgians, UCB, who devoured Celltech in 2004 for £1.5bn and the French via Sanofi Pasteur that acquired vaccine darling Acambis for £285m in 2008.
Nor are American acquisitions of Cambridge companies particularly novel, even though the 2011 burst may seem extraordinary.
Cambridge inkjet companies started sliding down an invisible transatlantic chute in 1993 when Videojet acquired Elmjet for our old friend the undisclosed sum. The following year, Danaher Corporation captured Linx Printing for £85.7m.
A year later the Internet Service Provider, Unipalm PIPEX, was sold to UUNet for £150 million; UUNET was swallowed by WorldCom within 12 months.
There was to be an inter-regnum of three years in the land of King Dollar before the greenbacks surfaced again in any significant volume: Pi Research, pioneer of cockpit telemetry for F1, Indy Cars and on-road autos was bought by Ford in 1999 for an undisclosed sum and morphed into Visteon, making Pi founder Tony Purnell a multi-millionaire in the process.
Nor was it always hi-tech that was the attraction as Cambridgeshire business opportunities were pursued by our American cousins. Two weeks before Christmas in 1997 Santa came calling early with a $1.325 billion deal from heavy equipment maker Caterpillar Inc to take LucasVarity subsidiary Perkins Engines in Peterborough.
So M & A activity in recent Cambridgeshire business history has rather resembled one of those fairground mirrors that refract as much as they reflect. Deal flurries have been the pattern.
Two major deals came in 2001 as Globespan bought Virata for $1.3 billion and Convergys laid out £470m for Geneva Technology. 2011 has been one, long unprecedented procession – IBM’s swoop for i2 the latest (undisclosed) swiftly following the $11bn sale of Autonomy to HP. Datanomic went to Oracle (undisclosed), Zeus to Riverbed Technology (£140m), Alpha Biologic to Viropro for a more modest £13m, Astex Therapeutics to SuperGen via a genuine merger.
This has been the most prolific year by far for US acquisitions of Cambridge area companies; 2004 was notable for the acquisitions of Alphamosaic by Broadcom for $123m, Trigenix by Qualcomm ($36m) and Active Hotels by Priceline.com ($161m) as all the buyers have stayed the pace with local roots.
2006 saw Motorola take TTPCom for $193 million and Illumina secure Solexa in an all-stock deal valued at $600m. A year on and Citrix Systems had acquired XenSource for $500m.
‘Undisclosed’ was slapped all over Google’s surprise move for Phonetic Arts in December 2010. The Cambridge firm’s speech technology promises to revolutionise the games industry.
The Cambridge conveyor belt of tasty tech morsels continues to roll out, tickling the palates of wealthy corporate connoisseurs all over the world. But with China, India and Russia starting to force places at the table, the Americans’ seemingly insatiable appetite for Cambridge fare may not be so easily assuaged in years to come.
• Seven companies who have won Business Weekly’s Business of the Year Awards title went on to be acquired in lucrative global deals accumatively worth $16 billion. Pi Group (1990 and 1994 champion) was acquired by Ford Motor Company. The 1992 winner Perkins was bought by Caterpillar. 2000 champions Virata went to Globespan. Our 2002 Business of the Year, Acambis, was acquired by Sanofi-Pasteur. Cambridge Antibody Technology was acquired by AZ shortly after winning the 2005 competition and 2007 champion, Autonomy, has just been taken by HP.