Cloud usurps Green IT as top private equity investment area

News Caroline Donnelly Nov 21, 2012

Report by financial advisors Grant Thornton UK suggests private equity players will be fighting to invest in cloud firms over next two years

Cloud computing is one of the private equity (PE) community’s top areas for future investment, according to a new report from financial advisors Grant Thornton UK.

The firm’s “Where is the smart money going in Technology?” report claims more than 92 per cent of PE and venture capitalists consider cloud to be an “attractive” proposition, with half planning to invest in this area within the next two years.

The managed services industry also seems to have caught the imagination of investors, with 30 per cent of the 40 PE experts and venture capitalists who took part in the report expressing an interest in investing in this area.
[pquote]They are raising larger funds and finding it difficult to locate good investment opportunities. [/pquote]
Moreover, 32.5 per cent said they planned to invest in mobile enterprise offerings, 30 per cent in mobile security and 25 per cent in storage and infrastructure.

Green IT topped the poll as the least attractive area for investment, with 55 per cent of respondents giving it the thumbs down, while cloud and managed services, respectively, accrued just 7.5 per cent and 17.5 per cent of the vote.

Wendy Hart, head of technology at Grant Thornton UK, said the report’s findings are a good indicator of how fast moving the technology sector can be.

“When we produced an equivalent report in 2010, the focus of investors was on green technology,” wrote Hart in the report.

“In 2010, Bring Your Own Devices was an undefined trend and...defining cloud in any meaningful operational way was beyond most. How things have changed in three years.”

The report also showed respondents expect the level of PE investment in the technology market to grow over the next two years, with UK investment firms expected to lead the way.

For instance, two thirds of respondents said they expect to come up against other UK-based PE players when competing for deals, while 23 per cent said they viewed overseas investors as their main competition.

However, Hart warned that PE investors should not rule out coming up against US investors when competing for tech firms’ affections.  

“They are raising larger funds and are finding it increasingly difficult to locate good investment opportunities in the US,” explained Hart.

“Investors have rediscovered their appetite for technology assets, especially as fragmentation is creating a large number of specialists in niche areas, [as well as] buy-and-build opportunities for the cloud, managed services and big data [markets].”