q3 quarterly review - regentassay.com€¦ · quarterly review | european tmt m&a q3 2019...

Q3 QUARTERLYREVIEW

Regent Assay’s review of European Technology, Media and Telecommunications Acquisitions

2019 Issue

TMT M&A ACTIVITY CONTINUES TO

DECLINE IN FOURTH CONSECUTIVE

QUARTER – 1

UK & IRELAND REMAIN

MOST ATTRACTIVE PLACE

FOR INVESTMENT – 3

CONTENT & MEDIA INDUSTRY

LEADS ACQUISTIONS IN QUARTER

FOR FIRST TIME IN 2 YEARS – 4

VALUATION MULTIPLE

PERFORMANCE – 6

INSTITUTIONAL INVESTORS

APPETITE – 9

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IPOsAcquisitions

Number of Transactions in Europe - Quarterly Trend

Number of Acquisitions Number of IPOs

European TMT M&A Activity Update

Quarterly Review | European TMT M&A Q3 2019

Acquisitions and IPOS

The total number of transactions in the TMT sectordecreased for a fourth consecutive quarter, downfrom 961 in Q2 to 950 in Q3.

Moreover, only 10 companies went public over thatperiod, amid an economic slowdown in Europe, andparticularly in the Eurozone, which is beingincreasingly affected by the ongoing global tradetensions.

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Aggregate value by quarter

The total value of deals announced increased by14%, reaching $73.3 billion in Q3.

As in Q2, a total of 9 transactions were valued at $1billion or more, including one $10bn+ deal (LondonStock Exchange acquisition of Refinitiv); however,the number of deals in the upper end of the middlemarket ($100m - $1bn) decreased by 16%, to 25.

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108

1518

1012

9 9 9

38

44 43

30

4441

30 30

25

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19

Quarterly Trend of Large Deals Numbers

Deals > $1b Deals $100m to $1b

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Total value of deals in $bn

248

114

108

91

55

35

43

41

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84

62

33

UK & Ireland

Germany

France

Scandinavia

Benelux

Italy

Austria & Switz

Spain & Portugal

Greece, Turkey & Israel

E. Europe

North America

Rest of World

Region of Acquired Company (Q3 2019)

Country and Industry Sector Activity


Regional headquarters of buyers andsellers

The United Kingdom and Ireland remained by far themost attractive place in Europe to invest in TMT, with248 acquisitions closed, 25% of all deals. UK andIrish buyers were also the most active in the region,followed by North America (N.A) and France.Countries with active buyers tend to see manyacquisitions; this is the case as most deals aredomestic. However, investment from N.A into Europefar outpaced interest by European companies for N.ATMT companies: there were twice as many buyers(133) from N.A than there were sellers (62) in Q3.Germany and Scandinavia completed the ranking,both in terms of buyers and sellers, with EasternEurope the 5th most attractive region to invest in,thanks to high levels of growth in Poland and CzechRepublic which continue to accelerate thedigitalisation of these respective economies.

3

Q3 most active buyers

UK & Ireland

2158%

North America

1338%

France

12231%

Germany

1002%

Scandinavia

9221%


Industry profile of acquired company

Acquisitions in the Content & Media industry toppedthe table for the first time in the past 2 years, with atotal of 221 deals, an increase of 21% from Q2. Intotal, Content & Media deals accounted for 23% ofall transactions in Q3.

The number of acquisitions in the software and ITservices (SITS) sector decreased by 12% in the thirdquarter, after already dropping by 8% in Q2. Morespecifically, acquisitions in the IT Services sectordecreased by 26%, which amounted to 71 fewerdeals closed in that industry. Overall, SITSacquisitions still accounted for 413 deals, 43% of alltransactions.

Applied Technology was the fourth most acquisitivesector with 104 transactions, followed by E-commerce, with 77.

Finally, the Telecommunications industry (services &equipment) totalled 64 deals, or 7% of alltransactions, down from 66 in Q3.

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Quarterly Technology Acquisition Trends by Sector

Other Services (ecommerce)

Applied Technology

Content & Media

Comms Equipment

Comms Services

Computer Hardware

IT Distribution

Software

IT Services

Content & Media 221

Software 213

IT Services 200

Applied Technology 104

E-commerce 77

Communication Services 45

Computer Hardware 37

IT Distribution 34

Communications Equipment 19


Number of acquisitions per sector

5

Valuations


Price to Sales and Price to EBITDA ratio,by industry.

The valuation multiples (P/Sales and P/EBITDA) inthe European TMT industry remained strong. TheP/EBITDA multiple gained 2 points, to reach 10.7, itsthird highest value of the past 5 years, while theP/Sales ratio increased slightly from 1.42 to 1.56.

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Valuations of European TMT Companies

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Valuation multiples differ quite substantially fromindustry to industry: for example, SITS businessestend to trade at higher multiples than the overallaverage. This was the case again this quarter, asSITS businesses sold an average 16 times theirEBITDA, and nearly 2.5 times their sales.Impressively, the EBITDA multiple of SITSbusinesses has more than doubled since Q1 2018(+113%).

The largest EBITDA multiple this quarter went to theTelecommunications industry, at 17.1. On the otherhand, Telco businesses traded at only 1.1x theirrevenue. The Telco industry has witnessed aninteresting trend since the beginning of 2019, withsimultaneously decreasing P/Sales multiple andrising Price/EBITDA multiples.

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Companies in the Content & Media industry tradedbelow the TMT market average, at 8.25 and 1.5times their EBITDA and revenue respectively. This isalso below the sector’s average of the past 6quarters, which could explain the high number ofacquisitions within Content & Media in Q3, asbusinesses in the industry are being sold at arelatively modest price.

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Institutional Investment


Private Equity, Venture Capital andTechnology Investors.

A total of 136 TMT companies were acquired byinstitutional investors in Q3. This figure comprises allinstitutional and leverage buy outs, managementbuy ins or buy outs and any other transactionconducted by a non-trade buyer. Software and ITservices companies received half of all investments,with 68 deals, followed by Media businesses (26transactions).

Similarly, on the sale side, just under half (48%) ofall investments were realised in the SITS sector,18% in the Media industry and only 5% in the Telcosector. In total, 84 prior investments were realised inQ3. The fact that there were 52 more new deals thanexits, coupled with the record low number of IPOs,could suggest that institutional buyers are holding onto their investments for longer.

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SITS

Med

ia

Telc

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Tech

IT D

istr

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Name of Buyer Name of Target Industry Deal Value EV/EBITDA

Advent (USA) Cobham (UK) Applied Technology $4.9bn 15.3

Bain Capital (USA) Kantar (UK) Content & Media $4bn 8.2

Allianz Capital

(Germany)Noegig (Austria)

Communications

Equipment$331m n.a.

Equistone Partners

(UK)

Elektron Technology

UK (UK)Computer Hardware $128m 11.2

Socadif, Bpifrance

(France)Wifirst (France) Communications Services $126m n.a.

9

Top 5 TMT IPOs in Q3

Investments per sector, Q3 2019


European TMT Acquisition map

North America

Europe(including UK & Ireland)

UK & Ireland

Rest of the World

Buying in Europe

Selling to Europe

Intra-European transactions

Domestic transactions

133

62687

148

35

33

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About our research methodology

For more than 20 years the TMT research group atRegent Assay has tracked acquisitions involvingEuropean technology companies.

Data is drawn from Standard & Poor’s Capital IQ, thepress, company reports, investor statements, andthrough direct investigation. The resultingproprietary database is used to producecomprehensive analysis of current market dynamicsas a critical ingredient in Regent Assay’s acquisitionservices to identify targets and predict valuationtrends.

This report contains our analysis of the TMTacquisition transactions announced in the 3rdquarter of 2019 involving European companies.

All data is drawn from the proprietary Regent Assayresearch database and includes companies in IT andbusiness services, software, telecommunications,media, embedded technology, online retail, ITdistribution, as well as electronic systems,components and semiconductors.


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About Regent Assay


Regent Assay is a hybrid corporate finance andconsulting practice with a unique blend of provenstrategic advisory and transaction services.

Our mission is to help owners of privately heldcompanies create equity value throughout thebusinesses life-cycle and to ultimately secure themaximum return at the point of exit.

We work with owners and management teams whoare looking to prepare for a full or partial exit (nowor in the future), accelerate their growth organicallyor by acquisition and who want to optimise futureprofits.

Behind Regent Assay’s success is its people, a highlyexperienced team of business professionals whohave considerable transaction experience. Many ofthe team have themselves been owner managerswho have exited businesses giving them a uniqueinsight and empathy with our clients.

International coverage

Regent Assay is proud to be a member firm ofGeneva Capital Group (GCG), a global network ofM&A, Corporate Finance and Strategy firms with apresence in over 50 cities across the world. The GCGsector and industry know-how and worldwideconnections make the network ideally positioned toadvise clients on how to complete their transactionssuccessfully.

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q3 quarterly review - regentassay.com€¦ · quarterly review | european tmt m&a q3 2019...

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