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Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co.is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
www.harriswilliams.com
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CONTENTS
European Update
Focus on the Technology, Media & Telecom Industry
Harris Williams & Co. Momentum
CONTACTS
Thierry MonjauzePhone: +44 20 7518 [email protected]
Ed ArkusPhone: +44 20 7518 [email protected]
Jeffery PerkinsPhone: +49 69 3550638 [email protected]
Christopher DarlingtonPhone: +44 20 7518 [email protected]
Will Bain
Phone: +44 20 7518 8906
Lars Friemann
Phone: +49 69 3550638 12
Jonathan Organ
Phone: +44 20 7518 8909
LONDON OFFICE
63 Brook Street
London W1K 4HS
United Kingdom
Phone: +44 20 7518 8900
FRANKFURT OFFICE
Bockenheimer Landstr. 33-35
60325 Frankfurt
Germany
Phone: +49 69 3650638 00
MARKET OBSERVATIONS
European middle market M&A activity decrease by 12.3% in Q2 2016, compared to Q1 2016, while overall transaction volumes grewby 2.9% Y-o-Y
Consumer, TMT and Industrials have been the three most active sectors, accounting for approximately 34%, 20% and 20% of totaldeal volume, respectively
Strategic investors continued to be active and represented 83% of acquirers during Q2 2016
EUROPEAN UPDATE
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
MIDDLE MARKET M&A ACTIVITY – BY SECTOR(1) Q1-16 BUYER BY REGION(1)
International inbound M&A volume into Europe decreased by 6.2% Y-o-Y with 205 closed transactions
North American groups accounted for 71% of transactions completed with non-European buyers, up from 69% in Q2 16, closing 145transactions in the quarter
GDP rose by 0.5% in the Eurozone and in the EU28 during the first quarter 2016. On a Y-o-Y basis, GDP rose by 1.5% and 1.7% in theEurozone and the EU28 respectively
Business activity in the Eurozone has maintained a positive trend with a PMI reading of 52.8 in June 2016, slightly up from 51.6 in March2016
Source: Factset
Note: (1) Includes closed M&A transactions of majority stakes only, where deal value was undisclosed or between €25m – €650m, within United Kingdom, Eire, France, DACH
(Germany, Austria, Switzerland), Spain, Italy, Benelux (Belgium, the Netherlands, Luxembourg) and Scandinavia (Denmark, Norway, Sweden and Finland); By volume
0
300
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900
1,200
1,500
Q2-14 Q4-14 Q2-15 Q4-15 Q2-16
Nu
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Industrials TMT
Consumer Business Services
Healthcare Transportation & Logistics
Energy, Power & Infrastructure ADG
0%
20%
40%
60%
80%
100%
Europe North America
South America Asia (excl. China & India)
Africa & Middle East
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FOCUS ON THE TECHNOLOGY, MEDIA & TELECOM (TMT) SECTOR
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
Software / SaaS Internet & Digital Media
Highly collaborative global team of bankers across London, Boston, San Francisco
Deep expertise across 8 key verticals
Global relationships with leading technology companies and financial investors
Thoughtful advice, deep experience and technology expertise, creativity and attention to detail from our senior technology bankers have resulted in a track record of consistently exceeding our clients' expectations
TMT GROUP OVERVIEW
Enterprise Software
Data and Analytics
Infrastructure and Security Software
IT and Tech-enabled Services
Data Centre and Managed Services
AdTech and Marketing Solutions
Consumer Internet
Digital Media and Content
eCommerce
Mobile
GROUP FOCUS AREAS
Education
Energy, Power, and Infrastructure
Fintech
Healthcare IT
TMT Vertical Focus Area
Manufacturing
Professional Services
Public Sector and Non-Profit
Supply Chain, Transportation, and Logistics
HW&Co. OfficeNetwork Office
SELECT RECENT HW&CO. TMT TRANSACTIONS
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HARRIS WILLIAMS & CO. (HW&CO.) GLOBAL ADVISORY PLATFORM
25 year history with over 120 closedtransactions in the last 24 months
Strategic relationships in India andChina
Approximately 250 professionals across seven offices in the U.S. and Europe
10 industry groups
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HW&CO. PERSPECTIVE
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
Thierry MonjauzeLondon
+44 207 [email protected]
Generally speaking, TMT remains an active space. The nature of the sector means it is less impacted by some of the socio-political and economic vectors which impact other sectors. Activity remains solid across Europe and the U.S., but being in year eight of a bull run means activity may well slow down in the not too distant future. In the meantime, we are seeing increased numbers of U.S. investors looking to the UK and Europe for investment opportunities, especially whilst FX rates are so conducive to UK investment.
What is your general view of the TMT M&A market today? What do you see as the main differences between Europe and the U.S.?
A number of sub-sectors are consolidating at the moment. HCM (Human Resource Management) and SCM (Supply Chain Management) will continue to be active as vendors look to acquire horizontal capabilities and build out solution suites, or to in-fill weaknesses in products, sectors or geographical presence. Similar drivers exist in infrastructure software, where players are either going deep in specific capabilities, or looking to offer a one-stop-shop. Legal tech has been active and will continue to be as will marketing, BI and data analytics (and I am sure, many others).
Which sub-sector do you expect to be the most active in the next 12 months? Why?
Technology is permeating every aspect of our everyday lives. Most strategic buyers, irrespective of their sector, recognize this trend and increasingly understand the importance of technology as a strategic tool, rather than merely as a cost center. Strategic buyers understand that to stay relevant in dynamic environments, they need to build for the future, and are paying big prices for any business which will help them protect their position. This will continue not just for the next 12 months but as long as capitalism exists.
What emerging trends do you see in TMT and how is this driving strategic buyer appetite? How do you expect this trend to develop over the nexttwelve months?
Both five years ago, we saw strategic buyers hunkering down a bit with PE running ahead of them. Three years ago, we saw the return of the strategic. Now, we are seeing PE and strategic buyers go toe to toe, and that is pushing up pricing. PE and strategic buyers both have cash to spend, and PE are more educated than ever before. High-quality businesses which fulfil a strategic imperative and who are looking for a liquidity event will find themselves in a better position than at any other time, possibly in M&A history.
Who will drive the M&A activity, consolidation from strategic buyers or PE firms?
As mentioned, we see a lot of interest which has absolutely increased over the last few years. U.S. investors are understanding the high-quality product Europe has to offer and definitely see arbitrage opportunities in sectors where Europe is behind the U.S. We also see more international European business where the U.S. is a key market for growth. Partnering with a U.S. investor who is one click of the mouse away on webex or GoToMeeting has made more sense than ever before. Another common theme, particularly for strategic buyers, is increased appetite for businesses which have gained strong footholds in multiple markets within Europe. Being deep in multiple geographies is a strong differentiator and a real barrier to entry, and will remove significant amounts of pain for buyers looking to expand across Europe in a quick and meaningful way. Many PE investors will have this as a core investment thesis when acquiring single-geography companies to help drive value on exit.
What appetite are you seeing from U.S. investors for European-based TMT companies? How has that evolved over the last few years? What drivesU.S. interest in the European market?
It depends on the sub-segment. However, for every sub-segment, the U.S. market will be the largest homogenous market in the world and there are clear advantages in trying to crack that market over other, more varied international markets. HW&Co. has a hugely international practice, with our roots in the U.S., so we are well placed to advise on where interest will come from, whether it be the U.S., Europe or Asia Pacific.
Which global regions are European TMT companies targeting for growth?
Jeff BistrongBoston
+1 617 654 [email protected]
Sam HendlerBoston
+1 617 654 [email protected]
Mike
Wilkins San Francisco
+1 415 217 [email protected]
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HARRIS WILLIAMS & CO. UNPARALLELED MOMENTUM
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
REPRESENTATIVE RECENT TRANSACTIONS WORKPLACE CASE STUDY
Workplace Systems provides a SaaS-based workforcemanagement (WFM) solution
Workplace’s Smart SchedulesTM optimise and drive revenue,employee engagement and productivity
The Company’s proprietary schedule forecasting algorithmdelivers 99%+ accuracy 16 weeks out and 90%+ employeeproductivity
Workplace has offices in the UK, the U.S. and Australia
PROCESS NOTES
WORPLACE SOLUTION OVERVIEW
HW&Co. assisted Workplace with pre-process preparation, including operationalassistance (helping develop SaaS-related KPIs)
Distinct rounds of buyer education and buyer marketing discussions, with marketingfocused on a narrow group of strategic and financial parties
Efficient process management delivered competitive tension, increasing bid levels from IoIto close
Provided Shareholders with optionality and an optimal outcome
HW&Co. advised Workplace on its sale to WorkForce Software in June 2016
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Site-by-site visibility through 5*
Smart Rating and reports
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compliance management
Quick and simple manual or
automated
Best fit with labour demand
forecasts and constraints
Collaborative scheduling and live
data anywhere, anytimeHighly accurate based on multiple
business drivers
Schedule Optimisation
Schedule Management
Attendance Management
Intelligent Forecasting
Business Intelligence
Mobile
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Healthcare & Life Sciences
IndustrialsEnergy, Power & Infrastructure
Industrials
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Harris Williams & Co. has a broad range of industry expertise, which create powerful opportunities. Our clients benefit form our deep-sector experience, integratedindustry intelligence and collaboration across the firm, and our commitment to learning what makes them unique. For more information,visit our website at www.harriswilliams.com/industries.
HARRIS WILLIAMS & CO. OFFICE LOCATIONS
UNITED STATES EUROPE
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EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
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HARRIS WILLIAMS & CO.
6
SOURCES
DISCLOSURES
EUROPEAN UPDATE
INDUSTRY UPDATE │ SUMMER 2016
Business report
eMarketer
Eurostat
Financial Times
Markit Economics
Merger Market
S&P Capital IQ
Company Press Releases
Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.
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