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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
2013 2014 2015 2016 2017 2018 2019
0
5
10
15
20
25
30
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45
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400
600
800
1000
1200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
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.
1
Quarterly Review | European TMT M&A Q3 2019
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.
2
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
2012 2013 2014 2015 2016 2017 2018 2019
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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Total value of deals in $bn
248
114
108
91
55
35
43
41
36
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
Quarterly Review | European TMT M&A Q3 2019
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%
Quarterly Review | European TMT M&A Q3 2019
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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200
400
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800
1000
1200
Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
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
Quarterly Review | European TMT M&A Q3 2019
Number of acquisitions per sector
5
Valuations
Quarterly Review | European TMT M&A Q3 2019
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.
0
0.5
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1.5
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Q3 Q4 Q115
Q2 Q3 Q4 Q116
Q2 Q3 Q4 Q117
Q2 Q3 Q4 Q118
Q2 Q3 Q4 Q119
Q2 Q3
P/
S
P/
EB
ITD
A
Valuations of European TMT Companies
6
Quarterly Review | European TMT M&A Q3 2019
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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Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
P/
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EB
ITD
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Valuation multiples, Telecoms
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P/
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Valuation multiples, SITS
7
Quarterly Review | European TMT M&A Q3 2019
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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Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
P/
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ITD
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Valuation multiples, Content & Media
Institutional Investment
Quarterly Review | European TMT M&A Q3 2019
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.
68
26
11 118 7
5
SITS
Med
ia
Telc
o
Ap
plied
Tech
IT D
istr
ibu
tion
E c
om
merc
e
Co
mp
ute
r H
ard
ware
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
Quarterly Review | European TMT M&A 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
10
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.
Quarterly Review | European TMT M&A Q3 2019
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About Regent Assay
Quarterly Review | European TMT M&A Q3 2019
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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Full service offering
Equity Acceleration Planning
Company Sales
MBO’s & MBI’s
Debt & Equity Financing
Acquisitions
Private Equity
Regent Assay
Birmingham office London office80 Caroline Street 1 Royal Exchange AveBirmingham LondonB3 1UP EC3V 3LT+44 (0)121 200 3800 +44 (0) 207 464 4110www.regentassay.com
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