back to article Ex-Imagination Technologies boss tells UK Foreign Affairs Committee: Britain needs to stop overseas asset stripping

The UK must introduce a framework to prevent asset stripping of homegrown tech businesses by foreign powers, former Imagination Technologies CEO Sir Hossein Yassaie has told the British Parliament's Foreign Affairs Committee. The committee is investigating whether foreign acquisitions of UK technology companies represent a …

  1. Andy 73

    Security and stability

    The recent pandemic has been a timely reminder that, even ignoring security, the last couple of decades' rush to globalisation has resulted in chains of production and ownership that are highly dependent on a status quo.

    We saw this sudden awareness of structural risk emerge from the 2008 financial crisis - but didn't extend that awareness to physical production and intellectual property. We should be clear that the financial benefit of handing production and ownership offshore can result in structural risk and a long term weakening of our ability to compete, produce and innovate.

  2. Yet Another Anonymous coward Silver badge

    And who will pay ?

    If the government tells ARM they can't be sold to the Japanese, British Airways to the Spanish or Bentley to the Germans for national security - is the government going to step in and buy them instead?

    Or is the founder of every British company going to be told. You can only sell to a government approved buyer - which happens to be run by a friend of a cabinet minister, or to a US defense company because we have to stay friends with the yanks

    1. Andy 73

      Re: And who will pay ?

      Companies don't *have* to be sold.

      1. Yet Another Anonymous coward Silver badge

        Re: And who will pay ?

        >Companies don't *have* to be sold.

        No if you are running a haridressers and don't need to raise capital in the markets, offer stock to your employees or a way for your investors to get their money back - you don't.

        If you are hoping to start a company to compete with $Bn companies it is rather handy

        1. werdsmith Silver badge

          Re: And who will pay ?

          You can’t compete with $Bn companies if they can just buy you,

        2. joeldillon

          Re: And who will pay ?

          ARM, for one example, was already a large, well established and profitable company. It didn't need to sell itself to Softbank to raise money, it was doing just fine as is.

      2. John Brown (no body) Silver badge

        Re: And who will pay ?

        "Companies don't *have* to be sold."

        Yes, this! If a company has something innovative, why not sell non-voting shares to raise capital? That way rich foreign companies can invest, and reap the rewards when the company grows and makes more profits. There's no need to sell the whole company and export the technology and IP so the founder can retire, take a knighthood and rest on their laurels for the rest of their lives.

        1. Insert sadsack pun here

          Re: And who will pay ?

          "why not sell non-voting shares to raise capital?"

          Please give me money. You don't get to decide how I spend it.

          1. John Brown (no body) Silver badge

            Re: And who will pay ?

            And? Lots of investment is done on the basis that you are betting on a return with no control over how the company is run. In Apples case, you are simply betting on a rise in share value so you can sell them later. There's no dividends.

    2. Youngone

      Re: And who will pay ?

      As noted, companies don't have to be sold, and an awful lot of the "overseas investment" is not really investment as much as a huge payday for the shareholders.

      Your point about our American friends is quite right however.

      America has a long history of becoming belligerent when their economic interests are threatened.

      1. Olius

        Re: And who will pay ?

        "becoming belligerent" - +1 for the wonderful understatement :-)

    3. Thicko

      Re: And who will pay ?

      The use of the" friend of a cabinet minister" is a straw man. There are very good reasons why other countries protect their valuable assets. Our usual laissez faire attitude to almost everything in business is no way to protect a national asset.

      I dont know exactly what the government would say. Do you? What do other countries tell their security sensitive companies about who they can be sold to? Whatever it is, we should say it too rather than nothing at all. Or even worse, just mumble some flubbery about profit and freedom.

      1. John Jennings Bronze badge

        Re: And who will pay ?

        Britain was built on Laissez fare.

        See how successful it was and still is with everything from the development of steel to steam engine design to canals, from the building of textile industries to jet passenger planes and to advances in banking. Oh wait.... Some investors got stupendously rich, then stripped their industries internally - either directly by excess payouts to themselves with under investment in long term strategy or becoming distant from their business. That distance is only exacerbated by investment where the profit motive is to make returns on the capital - rather than long term development of the business.

        We call the investment process the 'financial market' for a reason - it is a mechanism for investors whose product is shorter term financial return, rather than the long term health of the business. Destroying the business in the long term is of no consequence. Britain invented this in the 18th and 19th C, with the 'canal boom', the 'rail boom', etc.

        in It does not take an international sale to destroy an internally developed industry, its a function of the financial market.

        1. Insert sadsack pun here

          Re: And who will pay ?

          "Britain was build on laissez faire"

          Are you having a giraffe? There's no laissez faire economics under imperialism. The Brits destroyed the Indian textiles market after invading. Those slaves, cotton, rum, steel etc that flowed through Liverpool, Bristol and London weren't being freely traded with willing buyers and sellers.

      2. Doctor Syntax Silver badge

        Re: And who will pay ?

        A couple of possibilities, I'm sure a little thought will throw up a few others:

        Impose a limit on the percentage of shares that can have a single beneficial owner.

        Require that the a minimum percentage of shares should be held by beneficial owners based in the UK.

    4. Anonymous Coward
      Anonymous Coward

      Re: Satelite designers missed a trick

      Have you heard of something called a Stock Market?

      Any profitable company can be turned into a PLC, allowing the original investors to sell their shares

      ARM is a good example because they were taken over by a Japanese company in what seemed like a legit, but massively overvalued deal. Then the Japanese company sold the IP to a chinese company. In 10 years time the Chinese will be making their "own" RISC processors and not paying a single penny in licensing to ARM. This has happened to so many companies in the past, you've got to wonder what secret deal Softbank had with the Chinese government.

  3. Tired and grumpy

    Just the minor problem of how to plug the enormous hole this would leave in our balance of payments, then. We depend utterly on foreign direct investment to balance the books. Maybe if we actually tried to do some more exporting of products and services, hmm?

    1. fajensen Silver badge

      Well, Brexit has put the jinx on all that.

      1. Trigonoceps occipitalis

        If you think, even for a moment, that multinational companies, or those that have that aspiration, will buy second best or over priced kit/IP etc because "Brexit" you are seriously deluded.

        Brexit may be, or may not be, the most rational of political decisions but please stop saying "Brexit" like it is some absolute final argument that supports your world view.

    2. Olius

      -1 for "balance the books". You can't balance the books in a society where the govt creates money and calls it debt, because the money can't be paid back.

      I'm not against the current structure, but people do need to recognise that all money is originally on loan from govt, and the "national debt" is a rough measure of how much money the govt has created and put in to society

      (Private banks then amplify the total by lending against a "gearing ratio", "capital flow" takes care of distributing it around the world and the pockets of billionaires are where money goes to die)

    3. Doctor Syntax Silver badge

      There would be nothing to stop a company investing from scratch in the UK, for instance Nissan. That can be positive for balance of payments providing they export more value in finished goods than they import in components and raw materials.

      When an existing, profitable business such as ARM is bought, however, it simply means that the profits now disappear overseas, even if work remains here.

      That leaves businesses which might collapse if they didn't receive additional capital. Were they to collapse any contribution they make to balance of payments would end anyway so there would be nothing to lose.

  4. Anonymous Coward
    Anonymous Coward

    Communists.

    Not allowing the unfettered free market to decide?! Maggie is spinning in her grave.

    1. Yet Another Anonymous coward Silver badge

      Re: Communists.

      She sold transputer to the French/. Possibly as a way of ensuring they didn't threaten to dominate the computer industry

      1. Anonymous Coward
        Anonymous Coward

        Re: Communists.

        You know I did wonder whether the sale of Austin Rover to the Chinese was a similar "poison pill" attempt to sabotage the Chinese car industry.

        Initially there was a smokescreen about keeping production at Longbridge, but unsurprisingly they closed it down and took all the IP to China. What must they have thought when they realised it was all designs for square steering wheels, and suspension systems based on the engineering principles of the spacehopper.

    2. Anonymous Coward
      Anonymous Coward

      Re: Communists.

      I don't know if you are being facetious, but you do bring up a point...

      If the founders of Imagination Technology were to be prevented from selling their company, would they have founded it in the first place? Would the investors have put their money in? Etc...

      1. katrinab Silver badge
        Unhappy

        Re: Communists.

        They would have to focus on things like selling chips to Apple rather than selling shares to hedge funds.

      2. Warm Braw Silver badge

        Re: Communists.

        would they have founded it in the first place

        Please correct me if I'm wrong, but, as I recall, Imagination sold because Apple - one of their largest customers - decided to take its GPUs in house, leaving Imagination twisting in the wind. I don't think it was a question of Imagination wanting to sell so much as it being their least worst option.

        The bigger problem is that there are no UK companies of scale that could be customers of Imagination or, indeed, ARM, so they're all vulnerable to the whims of larger foreign investment. The same, of course, is true for pharma - we very nearly lost AstraZeneca and the government were just fine with that too. Of course the government is now expecting them to save the nation by manufacturing vaccines.

        1. Anonymous Coward
          Anonymous Coward

          Re: Communists.

          >>we very nearly lost AstraZeneca

          Who's "we"? Are you a big shareholder in AZ?

          Either you believe in the free market or you don't. Which is it?

  5. Danny Boyd Bronze badge

    Eat the pie and have it too?

    "prevent sensitive technologies falling into the wrong hands, but without hindering the foreign investments"

    If I buy something I usually expect it to fall in my hands. If I don't buy something, the seller doesn't get my money.

  6. Anonymous Coward
    Anonymous Coward

    It did not used to be a problem

    Thatcher and her followers had no problem selling the UK electronics industry to the French and Americans.

    I guess the the US is upset about China rising up the ladder and has prodded the minister

  7. ZeiXi

    The Value of the Company

    How much a company can be sold for depends on the perceived value to the buyer. If you are afraid of your company falling into the wrong hands, do not sell. Not even to anyone you think will be as careful as you, because no one can control what happens in future and who will gain access to the technology eventually. A company exists to make money for its stakeholders. No one puts money in for National Security. Sooner or later the highest bidder gets the company.

    1. Roo
      Windows

      Re: The Value of the Company

      "No one puts money in for National Security."

      That's weird - because Boeing, Lockheed-Martin, General Dynamics, Dassault and BAe have been taking lots of money for National Security.

    2. ecofeco Silver badge

      Re: The Value of the Company

      Corporate economics works in an entirely different way. The corporation is always for sale to whomever can buy the most stock. Either buying outright purchase of control or voter control.

      Corporations have various means of preventing hostile takeovers. The poison pill is the most famous.

      The world of corporations does follow economics as the average person knows it.

      1. hoola Bronze badge

        Re: The Value of the Company

        You have missed one vital part of the chain, the "Active Investor". These are the VC scroats like Elliott Asset Management who target a company, buy sufficient shares that they can then influence who is on the board. At that point the company is utterly stuffed as the "Active Investor" now decides that the company is under performing. They then saddle it with huge debts and strip the assets, all without actually owning it.

        The "Active Investor" and their crony board members now walk away with millions in profit leaving a useless shell behind.

        This is just as bad as selling the entire company but is rather more under the radar.

    3. Fred Dibnah Silver badge

      Re: The Value of the Company

      A company exists to make money for its shareholders. FTFY. Stakeholders also include employees and possibly suppliers & customers, but apart from the occasional honourable exception such as Richer Sounds, they don't get much consideration.

      1. Cederic Silver badge

        Re: The Value of the Company

        Nonsense. A company may exist for many reasons.

        Making money for its shareholders isn't an unusual one, but it's far from the only one. For instance there are non-profit companies that explicitly seek not to make money for their shareholders.

    4. Doctor Syntax Silver badge

      Re: The Value of the Company

      "If you are afraid of your company falling into the wrong hands, do not sell."

      If a company is publicly traded the management are not the owners, they just work for them. The most they can do is to try to persuade the existing owners not to sell. Have you read none of the articles here about HP vs Xerox?

      In this case the suggestion is that the govt. should prevent businesses that are perceived to be strategic - economically or otherwise - being lost to the country. In this case those who are or, it's argued, should be afraid are neither the owners nor the management.

  8. Anonymous Coward
    Anonymous Coward

    The Value of a Company

    How much a company can be sold for depends on the perceived value to the buyer. If you are afraid of your company falling into the wrong hands, do not sell. Not even to anyone you think will be as careful as you, because no one can control what happens in future and who will gain access to the technology eventually. A company exists to make money for its stakeholders. No one puts money in for National Security. Sooner or later the highest bidder gets the company.

    1. BebopWeBop Silver badge

      Re: The Value of a Company

      Hello ZeiXi me old mucked - is that you?

      1. Doctor Syntax Silver badge

        Re: The Value of a Company

        It certainly looks like it. Same lack of understanding. My reply above applies here also.

    2. Julz Silver badge

      Re: The Value of a Company

      "A company exists to make money for its stakeholders. No one puts money in for National Security. Sooner or later the highest bidder gets the company."

      A company exists to do stuff that an individual can't. Governments put money into companies for products and services that the country needs for it's security. And as you yourself indicated, companies do not have to be sold.

      Only if you believe the mantra that companies merely exist to make money for their owners, would that make their greed the inevitable precursor to an eventual sale.

  9. clyde666

    title of article

    says : Britain needs to stop overseas asset stripping

    That reads like the old colonial attitudes of invade and plunder. I didn't think "we" had really stopped doing that, and I was quite pleased that Parliament was being told to put an end to it.

    Oh well, mine's the one with the ships full of plunder

  10. Chris Coles

    We have to turn the clock back

    This is a much wider problem than simply a matter of who owns what; this goes right back to a series of decisions made decades ago that are linked to the changes made to the function of what were then called "savings institutions". Immediately post WW2, while the government was deeply in debt, we saw the creation of many new companies that became bywords for the inventive and industrial capacity of the UK. Then, most new companies were formed from the investment of savings held by the people; savings that were guided by the local community stock brokers. Using my experience as a guide, anyone thinking of starting such a new business was almost certainly also a customer of their local stock broker; who in turn would put you into contact with others surrounding them who had funds available to so invest. Your new company was thus locally owned, initially entirely by the founders, then with the addition of funding from their surrounding community. All such new companies were thus locally owned and managed. Again, the mark of success was sufficient cash flow, created by a combination of the achievements of the employees in producing a successful product, allied to a increasingly prosperous surrounding community able to afford to purchase the product. As always, in any business, increased production requires ever increasing access to the working capital to expand that productive base, and your local bank, (then there were many such in each community), was where you went for such access.

    Longer term anyone wishing to take the business further, you had to be able to deliver secondary success in two vital aspects; regular delivery of good dividends to the existing shareholder base, and by regular I mean that you had to show that you were focused upon that aiming point above all others - your share holders always received good dividends; the second requirement being strong management, clearly holding the entire company concept together in the interest of both the quality of the employees and the success of the product on your chosen market. If you could fulfil those requirements, you could approach a savings institution, who would in turn spend a great deal of effort to check your company out; that it fulfilled their requirements. At that point, the savings institution would buy a proportion of the shares of the company; but of much greater importance, the company was essentially delivered to the people with savings, as a safe investment for granny. That purchase by the savings institution ensured the respectability of your ongoing business prospects.

    That in turn was the base foundation of the entire industrial economy. The longer term investment of our industrial economy came from such investment.

    All that came to an end when we were forced to abandon our colonies and the leadership of those colonies were repatriated and they in turn decided to combine all our best industries into large publicly owned, (government owned), businesses. British - everything! But they all failed because they were from then onwards managed by bureaucracy and they needed ever more funds to keep up the illusion of success. sic!. and someone came up with the great idea that the rules underpinning the savings institutions should be changed to suite the need to use the otherwise, savings of the people, normally invested in either the savings institutions holdings of industrial shares; or indeed their own purchases of those shares using grannies box of money under her bed.

    From that moment the entire function of the savings of the nation was diverted into the needs for further government funding; savings were from then onwards, increasingly diverted to be used entirely for the purposes of bureaucracy. Today we live in the fallout of those disastrous decisions where there are no spare savings available to be invested in our own industry; ergo the increasing use of the phrase- inward investment.

    The UK lacks adequate leadership within it's bureaucracy which has become in my opinion, completely corrupted by their access to those savings over so many decades. The problem can only be solved by fundamental changes that it would seem no one has the courage to set into motion.

    1. Doctor Syntax Silver badge

      Re: We have to turn the clock back

      You overlook the fact that the financial institutions that now hold the shares represent not the government but the savings of their investors. That includes my pension and very likely yours too. It also includes my direct investments and, if you have ISAs etc., yours too.

  11. Anonymous Coward
    Anonymous Coward

    Cough, ARM?

    Talk about closing the stable door after the horse has bolted.

    The educated economists will observe that Britain runs a trade deficit, therefore must generate and sell IP or companies to balance. Tech firms are of course the easiest to export of just about any type of IP.

    1. Doctor Syntax Silver badge

      Re: Cough, ARM?

      The usual description of your idea of balancing the books is "selling off the family silver".

  12. Anonymous Coward
    Anonymous Coward

    Xenophobia and Racism

    Ok, so the CCP isn't the greatest government on earth by a very long shot, but all of the jingoistic national security garbage feels like a precursor to something bad to me. With world leaders actively trying to lay blame for an illness, it's like we're in Flat Earth science territory.

    We live in a global world, and it is common for companies to be created, bought and sold. Leaving the meagre GPU patents that Imagination Technology owns aside, so what if Chinese, German, or Russian company wants to buy something? The Cold War has been over for 35 years now, but some people can't seem to look past it.

    This is probably why they blame the "foreign" people, rather than saying: "You know, GPUs were a 2010 problem: let's start a new company looking at other technology for the 2020s"

    1. Insert sadsack pun here

      Re: Xenophobia and Racism

      "so what if Chinese, German, or Russian company wants to buy something? The Cold War has been over for 35 years now, but some people can't seem to look past it."

      You can tell how the Cold War is over because Russia isn't invading its neighbours (Ukraine, Georgia), isn't an authoritarian regime (how many doctors have fallen out of windows for criticising the COVID response?), and isn't undermining weak democracies (Hungary, Guinea). No reason to examine why Russian companies might want to invest in dual use technologies at all...

  13. James Anderson Silver badge

    Stock market is not fit for purpose

    The current Uk financial services industry does not invest in anything.

    They just asset strip, either by forcing the management to hand over dividends each quarter by cutting costs, cancelling needed investment or selling of assets.

    If that does not work then selling to the first foreigner that comes along.

    Great for bankers bonuses.

    However there is no investment in new technologies, innovative companies . Worse when the overseas owner gets into trouble they shut down the foriegn operations -- i.e. the UK operation because its easier and cheaper to sack workers there. Even worse valuable brands are squandered, how long before you hear the word "Cadburies" and think YUK?

    1. Anonymous Coward
      Anonymous Coward

      Re: Stock market is not fit for purpose

      Wow - that's the most stupid thing I've read in a while.

      It isn't mandatory for a company to float on the stock market. They do so for the huge payouts to the people who currently own it (those are the people who actually decide whether to cash that in rather than invest that money in R&D).

      Any publicly traded company is part-owned by the share holders, who will have a variety of goals both short and long term. Mostly all they really want is a nice, consistent annual 5% return without having to get involved with the day-by-day business decisions.

      A sensible return on investment is what Imagination Technologies wasn't providing, presumably because their R&D investment decisions were poor, resulting in Apple and Android manufacturers dropping their crappy GPUs. That's why they got dumped, and the money reinvested somewhere better - usually in up and coming companies producing new technologies.

      1. Anonymous Coward
        Anonymous Coward

        Re: Stock market is not fit for purpose

        Actually, I think OP is right. Part of our corporate strategy to deliberately have a very large debt pile is to A) lever cheap interest rates against land and property and B) to act as a deterrent to asset strippers. There are outfits out there with a long history of pushing debt acquisition vehicles. Alton Towers is a very obvious example - abused as a debt vehicle by several owners to run up debt and buy more property. So much so that one of the major shareholders (Lego) got sick of stock market meddling and has orchestrated a way to take Merlin back off the market.

        Short selling has an awful lot to answer for. Rees-Moggy and his investment firm making a killing off gambling on the misfortune of others. Reform is needed in this space, for if you are not playing the game then you are being raped by it.

        1. Anonymous Coward
          Anonymous Coward

          Re: Stock market is not fit for purpose

          Short selling is nothing more than agreeing to a sale in the future. For example, "Next month I'll sell you 10 of my Apple shares for $100 dollars" is a short on Apple.

          Don't forget that Financial Mathematics is as advanced a topic as Computer Science. You'll quickly sound like someone who uses a CD drive for a cupholder...

          1. Anonymous Coward
            Anonymous Coward

            Re: Stock market is not fit for purpose

            Having spent 20 years in various finance and asset management roles I would like to think I am vaguely qualified to talk about the subject. Short selling is indeed, what you describe, but it is also effectively a form of gambling. All of the private services offering such capability are covered in warnings like 78pc of users of this service lose money for this very reason. Short selling contributes to instability for the gain of a minority of investment clubs with buying power, that have no actual interest in the business they are gambling on. No, if you don't think reform is needed against the cutthroat world that is high finance then you're either playing the game to profit from it, or being shafted by it. I'll leave it to you to work out where you think you are on that scale!

  14. Lotaresco Silver badge

    "how long before you hear the word "Cadburies" and think YUK?"

    I already think "yuk" when I hear "Cadbury's" because its "chocolate" is vile and always has been. It simply entered a steeper decline in 2010 when it was bought by Kraft. Since then its milk chocolate has tasted of cheese. Before that it simply tasted like over-sugared vaguely chocolate flavoured fat.

  15. Lotaresco Silver badge

    Behind the curve

    Generally it's safe to assume that by the time a politician starts to get the vague idea that a stable should really have some element of physical security that the horse will not only have bolted but will currently be charging along the Silk Road intending to be in Samarkand by evening.

  16. Prst. V.Jeltz Silver badge
    Coat

    Britain needs to stop overseas asset stripping

    I thought this was going to have something to do with the British Museum when i read the title

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