KKR to acquire BMC Software for $8.3bn

BY Fraser Tennant

In its largest acquisition since the financial crisis, leading global investment firm KKR is to buy BMC Software, a global leader in IT software solutions, in a deal valued at $8.3bn.  

BMC is being acquired from a private investor group led by Bain Capital Private Equity and Golden Gate Capital, and includes GIC, Insight Venture Partners and Elliott Management. The group has owned BMC since 2013.

Since then, BMC has reallocated hundreds of millions of dollars toward higher growth R&D and go-to-market initiatives to address the massive digital disruption that is taking place in industries around the globe. Furthermore, the company has helped companies accelerate their cloud adoption.

"With the support and partnership of our investor group, BMC significantly accelerated its innovation of new technologies and new go-to-market capabilities over the past five years," said Peter Leav, president and chief executive of BMC. "Our growth outlook remains strong as BMC is competitively advantaged to continue to invest and win in the marketplace.”

Acquirer KKR has a long record of supporting technology companies, having invested over $26bn in the TMT sector in the last decade. KKR also has experience with a number of enterprise systems software related investments, including Mitchell, Epicor and Calabrio.

"In an ever-changing IT environment that is only becoming more complex, companies that help simplify and manage this essential infrastructure for their enterprise customers play an increasingly important role," said Herald Chen, KKR member and head of the firm's technology, media & telecom (TMT) industry team and John Park, KKR member. "We are thrilled to partner with the talented BMC team to accelerate growth, including via M&A, building on BMC's deep technology expertise and long-standing customer relationships."

Financing for the transaction is being provided by Credit Suisse, Goldman Sachs Bank USA, Jefferies Finance LLC, Macquarie and Mizuho Bank.

“Customers can expect the BMC team to remain focused on providing innovative solutions and services with our expanding ecosystem of partners to help them succeed across changing enterprise environments,” added Mr Leav. “We are excited to embark on our next chapter with KKR as our partner."

The KKR/BMC transaction is subject to regulatory approvals and other customary closing conditions and is expected to be completed in the third quarter of 2018.

News: KKR to acquire PE-backed IT management business BMC in reported $8.3bn deal

UK economy droning on

BY Richard Summerfield

The UK economy could increase by £42bn, or 2 percent, by 2030, according to a new report from PwC. This growth will be built on the increased availability and commercial applications of ‘unmanned aerial vehicles’ – drones.

The report, ‘Skies without Limits’, claims that there could be 76,000 drones operating in the UK by 2030 and that around 36 percent could be used in public sectors, including defence, health and education. The number of jobs in the drone economy could be around 628,000.

One of the biggest advantages of drone use in the economy will be their ability to generate cost savings. The UK’s technology, media and telecoms industry could record cost savings of around £4.8bn by 2030, according to the report. Productivity would also benefit from greater drone usage. Cost reductions and efficiency improvements could increase so-called ‘multi-factor’ productivity by 3.2 percent, boosting GDP uplifts across multiple sectors, including the public sector, which could increase by £11.4bn, the construction and manufacturing sector (£8.6bn) and the wholesale, retail trade and food services space (£7.7bn).

Within the offshore industry, for example, the report says using drones to inspect a live flare stack on a North Sea oil platform could save £4m a day, compared to shutting the asset down for traditional methods.

Elaine Whyte, UK drones leader at PwC, said: “Drones have the potential to offer a powerful new perspective for businesses across a variety of industries, delivering both productivity benefits and increased value from the data they collect. The UK has the opportunity to be at the leading edge of exploiting this emerging technology, and now is the time for investments to be made in developing the use cases and trial projects needed to kickstart our drone industry.”

“Drones could spark significant improvements in the UK economy. The rise in GDP and job creation from drones uptake are expected to be substantial, but productivity is likely to see the greatest gains," said Jonathan Gillham, economics director at PwC. “By automating routine tasks, improving effectiveness, safety and reducing costs, drones will free up people to focus on higher-value work.”

The government is taking steps to help usher in the next phase of the drone economy, with a draft drones bill expected to be published this spring. Baroness Sugg, Aviation Minister said: “PwC’s research demonstrates the significant economic benefits that drone technology can bring to the UK. And they are already improving people’s lives – helping the emergency services and keeping key national infrastructure like rail lines and power stations safe. Excitingly this is just the beginning, which is why Government is doing everything possible to harness the huge future potential through our Industrial Strategy and Drones Bill.”

Report: Skies without Limits

Sony remains “number one” with $2.3bn acquisition

BY Fraser Tennant

In a $2.3bn deal which the multinational conglomerate says represents its commitment to its writers and artists, as well as to the music business as a whole, Sony Corporation has acquired a controlling stake in EMI Music Publishing – one of the world’s largest music publishing companies.

Once complete, the transaction will see Sony, which already holds the publishing rights to The Beatles, among many others, obtain a catalogue of more than two million songs, including hits by Queen, Kanye West, Alicia Keys, Drake, Sam Smith, Pink, Pharrell Williams and Calvin Harris.

“We are thrilled to bring EMI Music Publishing fully into the Sony family and maintain our number one position in the music publishing industry,” said Kenichiro Yoshida, president and chief executive of Sony Corporation. “I would also like to convey my gratitude to Mubadala, our equity partner in EMI Music Publishing, for sharing our long-term perspective on the potential success of music publishing and their support as we grew the business.”

Over the past six years, Mubadala Capital – the financial investment arm of Mubadala – and Sony have worked together as partners to create value alongside Sony/ATV, Sony’s music publishing arm. 

“EMI Music Publishing has been a successful investment for Mubadala,” said Hani Barhoush, head of Mubadala Capital. “I would like to personally extend my appreciation to the leadership at Sony and Sony/ATV, who have been instrumental in administering the EMI Music Publishing catalogue, as well as shaping the music landscape on a global basis. They have been tremendous partners to us.”

The Sony/Mubadala partnership, coupled with the global rise of streaming and paid streaming services, have led to an appreciation in value of the EMI Music Publishing catalogue as millions of new consumers have been provided access to innovative distribution channels. “The sale of our consortium’s interest in EMI represents a milestone for Mubadala and our private equity business,” added Adib Mattar, head of private equity for Mubadala Capital and chairman of EMI Music Publishing.

Mr Yoshida concluded: “In the entertainment space, we are focusing on building a strong intellectual property (IP) portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth.”

News: Sony takes controlling stake in EMI Music Publishing

UK financial sector wants immigration reform

BY Richard Summerfield

With less than a year to go until the UK’s exit from the European Union becomes official, there is still a great deal of uncertainty surrounding the process. However, the financial services sector, given its importance to the UK’s economy, is making its feelings known. A new report from EY and TheCityUK, ‘The UK’s future immigration system and access to talent’, has suggested that the government must urgently review the country’s immigration system if it hopes to succeed post-Brexit.

Ensuring that the UK’s financial sector is able to access skilled overseas talent is vital to the UK maintaining its pre-eminence as the leading international financial centre, the report claims. The sector raises more than £70bn per year in taxes. However, the cost of bringing skilled European workers into the UK could increase by up to 300 percent if existing immigration rules are applied unchanged to European citizens, and if planned Tier 2 visa fee increases come into effect.

“As we approach Brexit, there is a real need to review and reform the UK’s immigration policy to ensure it supports businesses and skilled overseas talent looking to contribute to the UK economy. The current Tier 2 visa system is out of date – we need a much more flexible and dynamic system, which responds to today’s very real skills shortages, particularly around technology, which will worsen if not addressed,” said Margaret Burton, a partner at EY. “People are the foundation of any company. Without access to the right talent, the UK’s future position as a global business leader will be under threat.”

“Britain’s success is built on openness,” said Miles Celic, chief executive officer of TheCityUK. "Being able to attract and retain the most talented people with the right skills, from both the UK and overseas, is a top priority for business leaders across the industry. The UK’s ability to draw global talent has long been a competitive advantage. Losing this could undermine Britain’s position as the world’s leading financial centre. A basic immigration system that is fit for the UK’s needs, future focused and fair is essential. Simply applying the current immigration system for non-European citizens to European citizens after Brexit will not work. Doing so is likely to worsen existing skills shortages and make it much harder to attract the talent British firms need to compete on the world stage following Brexit.”

The report sets out nine key recommendations which could reform the UK’s immigration system and still allow firms to access global talent while reducing the skills shortages which are holding back UK economic and productivity growth.

However, the financial services space is not the only industry demanding the government take action. The healthcare and agriculture sectors have also demanded unimpeded access to international talent after Brexit. Such demands will place additional, considerable strain on the government which is already struggling to map out a Brexit which will please ‘Leave’ voters, many of whom want tougher immigration controls.

Report: The UK’s future immigration system and access to talent

DHS unveils new cyber security strategy

BY Richard Summerfield

This week the US Department of Homeland Security unveiled a new national strategy for addressing the growing threat of cyber security risks.

According to the report, by 2020 more than 20 billion devices are expected to be connected to the internet, and a result of this growth and the increasing variety of these devices, a new approach to cyber security is required. The new strategy was released in compliance with the fiscal 2017 National Defence Authorisation Act, the DHS noted, and has been designed to prioritise and harmonise the department’s programming, planning, operational and budgeting efforts.

The DHS, which is responsible for securing federal networks and critical infrastructure from cyber sabotage, has identified five key areas of risk, or ‘pillars’, that it hopes to manage though the strategy, including risk identification, vulnerability reduction, consequence mitigation, enablement of cyber outcomes and threat reduction. These risk areas are particularly noteworthy given the evolution of cyber criminality in recent years. In particular, the strategy refers to the breadth of attempted cyber attacks on US government networks, which increased more than tenfold between 2006 and 2015.

Homeland Security secretary Kirstjen Nielsen said: “The cyber threat landscape is shifting in real-time, and we have reached a historic turning point. Digital security is now converging with personal and physical security, and it is clear that our cyber adversaries can now threaten the very fabric of our republic itself. That is why DHS is rethinking its approach by adopting a more comprehensive cybersecurity strategy. In an age of brand-name breaches, we must think beyond the defence of specific assets — and confront systemic risks that affect everyone from tech giants to homeowners. Our strategy outlines how DHS will leverage its unique capabilities on the digital battlefield to defend American networks and get ahead of emerging cyber threats.”

The announcement of the new strategy came on the same day that the White House removed the cybersecurity coordinator position from the National Security Council (NSC), as it felt that the role was no longer necessary.

NSC spokesman Robert Palladino said: “The National Security Council’s cyber office already has two very capable Senior Directors. Moving forward, these Senior Directors will coordinate cyber matters and policy. As they sit six feet apart from one another, they will be able to coordinate in real time. Today’s actions continue an effort to empower National Security Council Senior Directors. Streamlining management will improve efficiency, reduce bureaucracy and increase accountability.”

Report: US Department Of Homeland Security Cybersecurity Strategy