Tech is still the most popular kid at the M&A party

16 February

Tech is still the most popular kid at the M&A party

Sky-high valuations and digital transformation continue to push the TMT M&A envelope after an unprecedented surge in activity in the second half of last year—€190.1 billion was spent in 2H20, representing 78.5% of the total annual value.

A total of €242.3 billion was spent across 1,571 deals in the TMT sector in Europe in 2020—the highest annual value and volume on Mergermarket record. This was up 125.1% on 2019 figures and represented 31.5% of global TMT deal value (in 2019, its share stood at 22.1%).

Private equity firms were equally hungry to get into tech’s growth trajectory, with buyouts reaching their highest annual value and volume on record in 2020. Sponsors deployed a total of €46.8 billion across 410 buyouts last year, 24.5% up on the €37.6 billion recorded in 2019.

Will cybersecurity and software woo investors?

Some of the biggest deals in the final months of last year included S&P Global’s €36 billion merger with UK-based IHS Markit in the information services space and Nvidia’s €30 billion bid for British chipmaker ARM, which contributed to a total €99.8 billion spend within the technology sector alone.

That momentum carried into the new year, with the sector amassing €13.8 billion across 104 deals in January 2021—the sector’s second strongest start to the year on Mergermarket record. TMT was the most targeted sector in January in Europe ahead of pharma, medical & biotech at €10.2 billion.

Spaces like cybersecurity and software are expected to be just as active in the months ahead, due to the attractive combination of recurring revenue and resilience that can be found in both. Valuations in the tech sector jumped from an average of 21.8x EBITDA in 2019 to 25x in 2020—and are likely to remain high.

Deals in the pipeline include the sale of Czech telecoms giant CETIN by Czech investment group PPF, in the telecommunications space; the sale of FPE Capital-backed Questionmark, a UK testing and assessment software solutions firm; and Symphony Technology Group-backed System C, a UK-based social care software and services provider, in the software space. In the media sector, Federation Entertainment, a French movies and series producer and distributor, is also looking for investors.