2019 YEAR REVIEW

Regent Assay’s review of European Technology, Media and Telecommunications Acquisitions in 2019

TRANSACTIONS UP IN THE

EUROPEAN TMT MARKET– 1

UK & IRELAND TMT HUB– 3

SOFTWARE AND IT SERVICES

ACCOUNT FOR HALF OF ALL DEALS–

4

P/EBITDA MULTIPLE AT

RECORD HIGH – 6

LARGEST BUYERS BY

SECTOR – 7

ACQUISITION MAP – 9

European TMT M&A Activity Update

Year Review | European TMT M&A 2019

Acquisitions and IPOS

2019 was the third year of consecutive growth within the European TMT M&A landscape. The total number of deals increased steadily by 6% to reach 3902, up from 3680 in 2018. On average, 10 TMT transactions were completed each day in Europe in 2019.

Often, a decrease in the number of listings issynonymous with a general slow-down in M&A activity.However, this was not the case this year, as thenumber of IPOs nearly halved, down from 98 in 2018to 57 this year, despite an increase in transactions. Anexplanation as to why companies decided to snub thestock market can be found in the growing Europeanprivate equity market, which has offered an attractivealternative to going public.

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IPOsAcquisitions

Number of TMT Transactions in Europe - Yearly Trend

Number of Acquisitions Number of IPOs

Year Review | European TMT M&A 2019

Aggregate deal value

Despite an increase in the number of transactions,aggregate deal value dropped by 31%, at $259 billion.The number of transactions valued over $1bn went downto 41, while only 2 deals topped the $10bn threshold:the acquisition of Refinitiv by the London Stock Exchangein August, for $27bn, and the acquisition of CypressSemiconductor Corporation by Infeon Technologies AG inJune, for $10.1bn. Upper mid-market (deals between$100m and $1bn) activity also slowed down, which maysuggest more prolific deal making activity within thelower end of the M&A market.

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1012

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44 43

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4441

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2528

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

Quarterly Trend of Large Deals Numbers

Deals > $1b Deals $100m to $1b2

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total value of deals in $bn

Country and Industry Sector Activity

Year Review | European TMT M&A 2019

Regional headquarters of buyers and sellers

From an M&A point of view, the UK was undoubtedly theTMT hub of Europe in 2019. Indeed, UK & Irish companiesaccounted for nearly a third of all acquisitions (1011), and aquarter of buyers (906), dwarfing their closest rivals, theFrench, who closed 463 deals last year. Interestingly, therewere more than twice as many buyers (571) from the USAand Canada than there were sellers (274), which can beexplained by a strong US dollar and an already mature TMTmarket in those countries which tends to push investors tolook for opportunities elsewhere. Overall, there was a 32%increase in the number of North American buyers in 2019compared to 2018. Private equity players were especiallyactive in France, Germany and Scandinavia, leading thebuy-side activity in these regions. Also, German andScandinavian TMT companies accounted for 429 and 391acquisitions respectively, while 289 deals were closed in theBenelux region, often within the Content & Media industry.Untapped growth potential in Eastern Europe, particularly inthe Telecom sector, meant the region generated the 4th

highest number of acquisitions in 2019 (299), while theIsraeli software industry continued to attract inwardinvestment despite being bottom of the table, alongside itsregional neighbours.

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2019 most active buyers

UK & Ireland

9067%

North America

57132%

France

51333%

Scandinavia

4146%

Germany

3763%

1011

429

463

391

289

137

139

185

122

299

276

161

UK/Eire

Germany

France

Scandinavia

Benelux

Italy

Austria/Switz

Spain/Portugal

Greece/Turkey/Israel

E Europe

N America

ROW

Region of Acquired Company (2019)

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Quarterly Technology Acquisitions Trends by Sector

E-commerce

Content & Media

Comms Services

Comms Equipment

Applied Technology

Computer Hardware

IT Distribution

Software

IT Services

A total of 980 transactions were closed in the IT Services sector in 2019, which topped the table once again, despite a 2% decrease from the previous year. M&A within the Software industry jumped 20%, up from a total of 741 deals in 2018, to reach 888; closely followed by the Content & Media sector (876 deals, down also by 2%). Altogether, the Software and IT Services (SITS) industry accounted for 1868 transactions, or 48% of the total.Businesses operating in Computer Hardware, Applied Technology,Communications Equipment & Communications Services attracted moreinvestment this year than in 2018. Despite coming bottom in terms of thetotal number of transactions, deal activity in the Comms Equipment sectormore than doubled (+163%), increasing from 27 to 71, which representedthe highest increase across all sectors. Acquisitions within the CommsServices industry grew by 13%, which meant that the overall Telecom sectoraccounted for a total of 267 deals. Finally, acquisitions within the E-commercespace dropped by 14%, down to 273, while the IT Distribution sector sufferedits 6th consecutive year to year decrease in investment, down by 12% fromlast year, a 24% slump from 2013.

Industry profile of acquired company

Year Review | European TMT M&A 2019

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IT Services 980

Software 888

Content & Media 876

Applied Technology 338

E-commerce 273

Communication Services 196

Computer Hardware 126

IT Distribution 138

Communications Equipment 71

Year Review | European TMT M&A 2019

Number of acquisitions per sector

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Valuations

Year Review | European TMT M&A 2019

Price to Sales and Price to EBITDA ratio.

European TMT companies sold for record multiples in2019 as valuations continued to perform strongly.The Price to EBITDA ratio climbed to 10.29, thehighest figure of the decade, while the Price to Salesmultiple decreased slightly from 1.64 to 1.61, itssecond highest figure of the past 10 years.Nevertheless, both multiples have been on the risesince 2010, which illustrates the growing interest forthe TMT sector in the market.

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P/S

P/E

BIT

DA

Valuations of European TMT Companies

Price to EBITDA ratio Price to Sales ratio

Breaking it down by sector, SITS companies outperformed the overall TMTindustry. On average, SITS businesses were valued at 11.65 times EBITDAand 1.83 times Sales. Businesses in the Telco industry sold at lower thanaverage EBITDA multiples (10x), but at much higher Sales multiples (2.3x). This can be explained by the fact that these businesses typically carryhigh levels of capital, which tend to drive their depreciation rates up andinflate EBITDA. TMT buyers undervalued businesses in the Content & Mediasector, which sold on average at P/EBITDA and P/Sales multiples of 7.83and 1.56 respectively.

Year Review | European TMT M&A 2019

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Transaction Highlights

Software and IT Services

$67 bnEstimated total sector spend

11.65xP/EBITDA

1.83xP/S

Telecommunications

$67 bnEstimated total sector spend

10xP/EBITDA

2.3xP/S

Content & Media

$69 bnEstimated total sector spend

7.83xP/EBITDA

1.56xP/S

The Dublin headquartered and NYSE listedIT giant made a total of 27 acquisitions thisyear, a record across the European TMTmarket. 4 of these transactions involved UKbusinesses: consultancy firm Bow & Arrow,financial advisory practice Parker Fitzgerald,and marketing groups ?What If! Ltd andHappen Ltd were all bought by Accenture.

The Spanish telecommunications mammothpursued an aggressive M&A strategy in 2019,acquiring businesses across Western Europeand reinforcing its leading position in themarket. In total it made 8 acquisitions, two ofwhich were in the UK: the telecoms division ofArqiva, for $2.4bn, and the acquisition of 220high towers from BT Group, for over $100m.

UK based communications agency, DentsuAegis, was the most acquisitive businesswithin the Content & Media industry with 8purchases last year. The majority of its M&Aactivity was pursued outside of Europe,particularly in Asia, with acquisitions inSingapore, New Zealand, China and Vietnam.In the UK, it acquired creative agency BJLGroup and TV production companyre:production.

Most acquisitive companies by industry

Private Equity, Venture Capital and Technology Investors.

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New investments, by industry

166

41

21

34

27 15

Realised investments, by industry

SITS Media Telco Applied Tech Ecomm Other

A total of 508 TMT companies were acquired by institutional investors in2019. This figure comprises all institutional and leverage buy outs (IBO,LBO), management buy ins or buy outs (MBI, MBO) and any othertransaction conducted by a non-trade buyer. SITS businesses receivednearly half (46%) of all new investment, with 236 deals, followed bycompanies in the Media sector (115). The Applied Technology industry,which regroups developers of new systems and technologies withinhealthcare, defence and manufacturing, attracted the third most interestfrom private equity players (43). On the sale side, over half of allinvestments were realised in the SITS sector, with 166 exits, 13% occurredin the Media industry and only 7% in the Telco sector. For every 10 exits inthe TMT industry in 2019, there were 17 new investments.

Selected UK IBOs

$4bn 8.2x 1.2x

$4.9bn 15x 2.1x

$5.5bn 7.6x 3.8x

Price P/EBITDA P/S

Year Review | European TMT M&A 2019

8

Year Review | European TMT M&A 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

571

2762755

591

139

161

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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 throughout 2019involving 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.

Year Review | European TMT M&A 2019

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About Regent Assay

Year Review | European TMT M&A 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.

Full service offering

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MBO’s & MBI’s

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Regent Assay

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