NewMedia SPARK, the incubator, plans to buy the technology corporate finance house NewMedia Investors Limited. NewMedia Investors will become a wholly owned subsidiary of NewMedia SPARK and will continue to offer services to NewMedia SPARK’s investments and corporate finance advisory services to new economy companies under the NewMedia Investors name.
NewMedia SPARK acquires the entire issued share capital of NewMedia Investors for GBP10 million, to be satisfied by the issue of 14,684,288 new SPARK shares. NewMedia Investors was an original investor in NewMedia SPARK when it began operations.
One of the key reasons given for the purchase was the need to cancel the Founder Agreement. At the time of NewMedia SPARK’s flotation in October 1999 (within a couple of weeks of NewMedia SPARK’s inception), the company entered into this agreement with NewMedia Investors. This undertook to give NewMedia SPARK first refusal on its relevant deal flow and to carry out a range of deal negotiation and investment monitoring functions in return for certain fees. As a consequence of NewMedia SPARK’s rapid expansion the incubator has made many several hundred thousand pound investments in early-stage companies the cost of the Founder Agreement was becoming a burden. Consequently the decision to buy NewMedia Investors will remove this increasing cost and, says NewMedia SPARK, immediately put it in a cash-flow positive position. This is because the increased overheads will be less than the payments under the management agreement.
In addition NewMedia Investors is SFA-regulated, a status that will enable NewMedia SPARK will be able to broaden its investment remit.
Michael Whitaker, chief executive officer of NewMedia SPARK, said: “The acquisition of NewMedia Investors will cut costs, allow us to widen our regulated activities and manage our business more effectively. The enlarged group will have a stronger corporate structure, facilitating further growth and allowing us to maximise returns for our shareholders.”