IP Group takes Parkwalk for $12m

Parkwalk Advisors, a UK-based growth investment firm focused on spinouts, was acquired by commercialisation firm IP Group for an initial consideration of £10m ($12.4m) today.

IP Group, a longstanding co-investment partner of Parkwalk’s, could pay an additional £10m for the fund manager, if Parkwalk meets undisclosed business performance targets.

The initial £10m comprises an upfront payment of £5m in cash, £2.5m in newly issued IP Group ordinary shares, and a further £2.5m in cash paid out in two equal tranches over two years, subject to certain unnamed conditions being met.

Provided that Parkwalk achieves its performance targets, the other £10m would be paid out in the form of £5m in cash and £5m in IP Group shares over three years.

Founded in 2009, Parkwalk invests in spinouts at all phases of development, from early stage to stock exchange-listed, and manages funds for the tech transfer offices of Cambridge, Oxford and Bristol universities.

The funds Parkwalk manages seek to benefit from two complementary UK government tax programs known as Enterprise Investment Schemes (EIS).

Seed Enterprise Investment Scheme offers 50% income tax relief to individuals buying new shares in small, early-stage companies, while Enterprise Investment Scheme offers 30% income tax relief to investors in higher-risk small companies.

The largest university spinout-focused EIS fund manager by capital raised, Parkwalk has amassed more than £100m to date, mainly from private wealth sources. Since its launch, Parkwalk has backed more than 60 companies.

In 2016 Parkwalk contributed in excess of £40m to UK university spinouts, and co-invested over £17m in 14 investment rounds in the 2015-2016 financial year. 

Most recently, Parkwalk and tech transfer office Cambridge Enterprise unveiled the £2.5m Cambridge Enterprise Fund V earlier this month.

Parkwalk did not disclose its latest returns, but says it is “a profitable business” and will be “immediately accretive” to IP Group’s operating results. The firm will retain its current investment team and decision-making independence post-acquisition.

IP Group invests mainly in spinouts of its 16 UK-based and 8 US-based partner institutions such as Johns Hopkins University, Cardiff University and King’s College London. It focuses the biotechnology, cleantech, healthcare and technology sectors.

IP Group previously also acquired its peer Fusion IP in 2014, having initially taken a minority stake in 2009.

Alastair Kilgour, co-founder of Parkwalk, said: “The acquisition of Parkwalk by IP Group gives our underlying investors the security of being part of a larger organisation, which also brings with it specialist resources and expertise around developing businesses formed around hard science.

“The strength of IP Group will allow Parkwalk to expand and enhance its EIS fund offerings, helping to boost the UK technology base and returns to investors.”

Alan Aubrey, chief executive of IP Group, said the acquisition provides “access to a diversified pool of capital for co-funding the earlier stages of the portfolio while…[developing] closer links with institutional investment platforms.

“We consider EIS funds to be an increasingly important source of financing for early-stage technology companies and believe Parkwalk’s strong links to…institutional wealth managers and university partners will be beneficial.”