23 May 2017

Based on our own insights on the importance of collaborative innovation to corporate strategy and innovation, Bond Dickinson commissioned consultancy Cebr (the Centre for Economics and Business Research) to conduct the economic research outlined in this report. This study was conducted in April 2017 using four years of comprehensive quantitative information sourced from global private company information provider Bureau Van Dijk.

The business collaborations quantified in this research relate to asymmetric M&A deals which involve large businesses (of any nationality) and UK small and medium-sized enterprises (SMEs), in which the acquirer was the large business. Collaborations are defined as deals identified as mergers and acquisitions, corporate joint ventures which create a separate corporate entity, and minority stake purchases. The analysis excludes commercial joint ventures based purely on contractual arrangements.

Business size was defined by employee numbers - with fewer than 250 being an SME, 250 employees or more being a large organisation. To enable focus on collaborative deals between established businesses and SMEs rather than traditional investment activity, deals which were financed through angel investment, development capital, crowdfunding, private equity or venture capital were excluded from the analysis.

Not all collaborative business deals identified in Bureau Van Dijk’s Zephyr database have associated deal values. For a deal to have a recorded value, the companies involved must formally announce the deal to their shareholders and the information must be disclosed in the public domain. Missing deal values are therefore typically present for deals involving private companies, where completion information on deals is more difficult to ascertain.

Deal volume and value is collected in financial years running from 1 April to 31 March. Trends by industrial sector were captured using 2007 Standard Industrial Classification (SIC) codes. R&D Comparison The total values of business collaborations in each year have been put in context by comparison to the Business Enterprise Research and Development (BERD) expenditures sourced from the Office for National Statistics (ONS) as part of the annual ONS Business Innovation statistical release.

As the definition of business collaborations used in this study covers deals featuring UK SMEs as the target, where the large business acquirer can be of any domicile, the comparison used BERD expenditure taking place in the UK and undertaken by large businesses, regardless of whether their ownership was foreign or domestic.

The ONS produce BERD statistics on a calendar year rather than financial year basis, while business collaborations have been captured on a financial year basis; direct comparisons should therefore be treated as indicative.

While the ONS had not yet released their statistical estimate for the total value of large business R&D expenditure in 2016 at the time of the analysis, Cebr provided a forecast based on the historically stable ratio between business R&D expenditures and wider business investment using full data for 2016.