Advisory

M&A half-yearly dealtracker high tech industry

Wouter Wolzak Wouter Wolzak

In our half-yearly dealtracker updates we analyse mergers and acquisitions for the high tech industry. We highlight the following aspects of this sector from an M&A perspective:

  • An overview of the Dutch transactions.
  • A description of what is happening in terms of valuations and number of transactions.
  • A further analysis in terms of geographies and sub-sectors.

2020 1st half year

COVID-19 lockdown measures affected M&A activity in the European High Tech industry

The global spread of the virus deprived the confidence in the financial markets and led to unseen lockdown measures taken by national governments. In general, M&A deal activity plunged during the first half of 2020 due to the lack of confidence and the way in which deal execution is organised (physical meetings, management presentations, et cetera). We notice that transactions are mainly driven by gaining technological knowledge and expertise. For example, Kardex acquired the in the Netherlands based Robomotive in order to gain access to superior knowledge in the development and implementation of smart robot technologies. Another key transaction driver is the stunning amount of dry powder ($2,3 trillion worldwide).

2019 2nd half year

Total deal volume in the European High Tech Industry remains high with 606 deals in the second half of 2019

This is in line with the relatively stable average of 600 deals every second half year over the period 2015-2019 and reflects the continuing importance of technology. So far M&A activity in the sector is unaffected by concerns of a potential economic slowdown. This is also reflected by the large amount of cross-border transactions, in which Germany, France and the United Kingdom are the most active buyer countries in Europe. Outside of Europe, the United States has a significant role as well.

The outlook for M&A in the High Tech sector remains strong. Both transaction and trading multiples have increased significantly in 2019 compared to 2018. Transaction multiples have increased from a median of 8,2x EBITDA to 10,6x EBITDA, which shows the increased demand for high tech companies. Furthermore, the increased trading multiples indicate that listed tech companies are valued more highly at this moment.

2019 2nd quarter

The number of M&A transactions in the Dutch tech sector has stabilized to 16 in the second quarter of 2019. This is comparable to the total number in the first quarter (14). In Europe we see a decline in the number of transactions, but a recovery of the valuations since the end of 2018.

An interesting theme we observe in the M&A activity among Dutch tech companies is sustainability. Out of the 16 transactions at least half have a rationale behind them that relate to sustainability.

We expect this theme to remain a key driver for M&A activity. At the end of 2015 world leaders and governments signed the Paris Agreement on reducing the carbon footprint and big companies worldwide are working on green solutions to reduce CO2 emission.

For listed technology companies in the Netherlands we also observe that the sustainable companies have the highest revenue growth outlook. Fueled by a drive to sustainability companies like Alfen and Sif are expected by annalists to grow their revenues by over 40%

2019 1st quarter

There continues to be a lot of interest in technology companies. Despite a lower number of transactions in the EU and lower valuations for listed companies in the Netherlands, the outlook for M&A in the technology sector remains strong. Technology is getting further ingrained in our lives and everybody needs tech. This quarter we have seen a number of non-tech companies like McDonalds, Fidelity and Bridgestone make technology acquisitions. As a consequence we see that the EBITDA multiples for technology transactions remain high and are even rising.

 

2018 4th quarter

High tech sector remains stable in terms of deal activity

The technology sector is an important sector for M&A. Important motivations for M&A in the technology sector are: acquiring a core technology, supply chain consolidation and general consolidation. In the long-term the outlook for technology driven M&A remains strong, driven by themes like cybersecurity, artificial intelligence and industry 4.0. In the short-term political tensions and, moving in tandem, lower valuations depress deal activity.

2018 3rd quarter

Dutch high tech sector remains attractive, despite somewhat lower deal volumes

The Netherlands have a strong high tech sector, especially when it comes to semiconductors, sensor technology and high tech systems. Important motivations for M&A in the technology sector are: acquiring a core technology, supply chain consolidation and general consolidation. In the third quarter of 2018 we observe a maturity of the deals related to the food tech and sensortechnology sectors.

2018 2nd quarter

Dutch high tech sector remains attractive despite somewhat lower deal volumes

The Netherlands has a strong high tech sector, especially when it comes to semiconductors, sensor technology and high-tech systems. Important motivations for M&A in the technology sector are: acquiring a core technology, supply chain consolidation and general consolidation.

2018 1st quarter

Dutch high tech sector remains attractive despite somewhat lower deal volumes

The Netherlands has a strong high tech sector, especially when it comes to semiconductors, sensor technology and high-tech systems. Important motivations for M&A in the technology sector are: acquiring a core technology, supply chain consolidation and general consolidation.

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