November 2016 Investment Banking European Tech M&A Activity Continues Post-Brexit Referendum In This Report SoftBank–ARM, Micro Focus–HP deals highlight ongoing activity in British European Technology Report tech Increased interest in Continental EuropeanTalend becomes fin tech the latest European tech company to have a successful U.S. IPO M&A, capital-raising, and public comps stats across European tech CONTENTS Executive Summary 1 Market Update and Analysis 3 William Blair Global Technology Banking Franchise 5 Sector and Transaction Data 7 EXECUTIVE SUMMARY European Tech M&A Activity Continues Post-Brexit Referendum Innovative technology industry. Two major transactions in Trustmarque Solutions, an end-to-end companies across the the third quarter, SoftBank’s IT solutions and services provider to acquisition of ARM and Micro Focus’s the public and private sector in the Continent are drawing acquisition of Hewlett Packard United Kingdom, on its sale to Capita, significant interest from Enterprise’s software business, one of the United Kingdom’s leading potential buyers. illustrate the continued outbound and providers of technology-enabled inbound activity involving U.K.-based business process management and The United Kingdom’s intended technology companies. outsourcing solutions. In August, we withdrawal from the European Union advised Liberata, a provider of On July 18, Japan-based SoftBank will be a complicated, drawn-out business process outsourcing, announced that it was acquiring process, and Brexit’s full impact on services, and automation to the U.K. Cambridge-based microprocessor M&A and capital-raising activity will public sector, on its sale to Tokyo- manufacturer ARM for $32 billion. The not be known for several years. In the based Outsourcing Inc. The transaction, which is the largest near term, however, many bankers transaction increases Outsourcing’s takeover of a British company by an and other industry commentators U.K. footprint and gives the company a Asian company according to The Wall expected the Brexit vote to have a platform for existing U.K. operations Street Journal, shows the level of significant chilling effect on M&A and other strategic acquisitions in the confidence that acquirers have in activity in the United Kingdom and U.K. outsourcing market. Trustmarque British companies, particularly those Europe as a whole. and Liberata both were portfolio that are global exporters. companies of Endless, a British private While the uncertainty caused by the At William Blair, we have seen this equity firm based in Leeds. June 23 vote has created headwinds increasing confidence in the growth for deal-making, M&A activity The post-Brexit referendum M&A prospects for U.K.-based technology involving European technology activity involving British technology companies play out in several recent companies has continued at a fairly companies has not been limited to deal processes. We advised robust pace over the past several months. Over the first three quarters of 2016, M&A value involving European technology companies has European Technology M&A Values totaled approximately €89 billion. We While European technology M&A activity has slowed from 2015’s record levels, examine the impact of the Brexit deal-making involving European targets and acquirers has continued at a fairly referendum and other trends that are robust pace over the first three quarters of 2016. shaping M&A and capital-raising Transactions Involving European Technology Targets and/or Acquirers (€ millions) activity in European technology. € 174,494 € 152,381 € 139,194 SoftBank–ARM, Micro Focus–HP € 103,404 Deals Highlight Ongoing € 74,653 Activity in British Tech € 53,088 The assumption that corporate deal- making would shift to a wait-and-see mode after the Brexit vote has not 2011 2012 2013 2014 2015 2016-YTD played out in Britain’s technology Source: Dealogic, as of November 8, 2016 1 inbound processes. On September 8, region’s leading financial technology Talend Becomes the Latest Micro Focus announced that it was marketplace, offering consumers a European Tech Company to acquiring the software assets of range of financial solutions such as Have a Successful U.S. IPO Hewlett Packard Enterprise for $8.8 loans and insurance from Zmarta’s With its successful July debut on the billion. The acquisition tripled the size comprehensive partner network. Nasdaq, France-based Talend became of Micro Focus and resulted in the Zmarta recently expanded into the latest European technology company taking ARM’s place in the Germany, and Hamburg-based Bauer company to go public in the United FTSE 100 index. emerged as a compelling partner to States. William Blair served as an support the next phase of underwriter of the $109 million Increased Interest in Continental Zmarta’s growth. offering, which priced above the European Fin Tech range. Like many other European For the past decade, financial More financial sponsors are technology companies, Talend built a technology has been one of the most developing cross-functional strong customer base and established active sectors in European technology. its research and development London, thanks to its advanced capital expertise when it comes to expertise in Europe before expanding markets and governmental policy that financial technology to the U.S. market and eventually has helped incubate the nascent investing. This allows funds accessing public capital there. sector, has clearly been the European epicenter of much of the innovation in to identify and aggressively While this pattern creates some financial services. pursue the most promising political debate and consternation in European technology circles, we In the last several years, however, companies. believe that it does not undermine the many promising, high-growth vitality of Europe’s technology start- The interest in financial technology financial technology companies have up ecosystem. U.S. markets have companies has come from strategic emerged across the Continent. As a proved especially adept at allocating buyers and financial sponsors, alike. result, financial sponsors and strategic capital to fund high-growth, Traditionally, financial sponsors acquirers are looking to cities such as innovative technology companies. By have viewed the sector from the Paris, Amsterdam, Berlin, and going public where the cost of capital perspective of investing primarily Stockholm to find the next disruptive is the lowest and the valuations are in either financial companies or force in financial technology. Britain’s the highest, this allows companies like technology companies. Recently, exit from the European Union and Talend to invest more resources in however, more funds are developing ongoing reforms in the European European operations, continue cross-functional expertise. The ability Union’s financial regulatory system expanding globally, and create more to understand the disruptive forces could cause this trend to accelerate value for their early-stage that drive innovation in the over the next several years. European investors. technology world as well as the Zmarta’s recent sale to Bauer Media regulatory and balance sheet To learn more about these and other Group in Germany highlights buyers’ issues that financial services firms trends that are shaping deal-making growing interest in financial face, have allowed firms with this and capital-raising activity in technology companies that are cross-functional expertise to European technology, please do not focused on continental Europe. Based identify and aggressively pursue hesitate to contact us. in Sweden, Zmarta is the Nordic the most promising financial technology companies. William Blair 2 MARKET UPDATE AND ANALYSIS M&A Valuations Across Sectors in European Technology Innovative financial technology companies across Europe are generating strong valuations and significant interest from strategic and financial acquirers. Although London remains the center of financial technology, cities across continental Europe are emerging as hubs of financial technology innovation. Median EV/LTM Revenue Multiples Software 2.99x Financial Technology 2.53x Internet & Digital Media 2.52x Semiconductors 2.48x Applied Technology & Systems 1.84x European Communications 1.26x Technology Services 0.98x We look behind the numbers Sources: Selected transactions since 2014; S&P Capital IQ, Mergermarket, and William Blair to examine the market market analysis; data as of November 3, 2016 dynamics that are driving trends in the deal-making IPOs by European Technology Companies While IPO activity has slowed in the technology industry, promising companies and capital-raising landscape such as France-based Talend have had successful debuts in 2016. Like many in European technology. other European technology companies, Talend built a strong customer base and established its research and development expertise in Europe before expanding to the U.S. market and eventually accessing public capital there. € 13,814 50 52 32 € 8,309 32 24 € 4,275 € 3,669 € 1,813 2012 2013 2014 2015 2016-YTD IPO Proceeds No. of transactions Source: Dealogic, as of November 8, 2016 3 Enterprise Value Distribution by Geography (2012 - 2016) European Technology M&A Activity by Country/Region UK & Ireland Brexit’s long-term impact on M&A activity 21% Benelux remains to be seen, but U.K.-based buyers and 30% sellers remained very active in the three months 1% Nordics following the June 23 referendum vote. This 2% France activity was headlined by SoftBank’s acquisition